“ We just started this about 5 months ago, and while it has made a profit, we haven't paid ourselves from this business yet.”----> As a sole proprietor or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.
“The LLC is set up as a 2 member, my husband and me.”---> The IRS has recently ruled that if you are in a community property state, you can treat the husband and wife as one taxpayer for purposes of the single member LLC rules.
” I guess what I'm really wondering is why did this insurance company send us a 1099 when all our other customers that aren't insurance related didn't, and they are all pretty much if not more money?”---->I guess as said previously, as the insurance company as a business entity, pays you, a non-employee, $600 or more , it is legally required to report it to the IRS, using the 1099-MISC form.
“We've never submitted a 1099 for work done our home, etc to businesses.”---->If you want to issue 1099-MISC Form, then you can, but only if the payments should be in connection with your trade or business. You do not use 1099-MISC for personal payments to individuals. For example, if you hire an independent contractor for repair service, then you can get him 1099-MISC. You can and should issue 1099's if any fees paid exceed $600. You would use Form 1099-Misc. You can also issue them if the amounts are less than $600 but you are not required to do so.
“I just was thinking that since we would be reporting the businesses income from our books, and that having this 1099 to file also would more or less show it twice. If that makes sense at all. One question, if you read this follow up...my husband asked if he next time tells the customer to have the insurance company to pay them, would this be in our best interest?”----> I am not exactly sure what you mean with your question. I assume( guess) that you do not want to get paid with a 1099. I guess it depends on the situation; for instance, if there are business expenses incurred ( this is true for your business as you always incur your business operating expenses), then you would report this 1099-Misc income on your schedule C listing your business activity along with all the reasonable business expenses incurred in earning the income on the 1099 just like your regular business income. And as you can see, you are liable for your Self-employment taxes ONLY on your business net earnings. In this case, there is no better off or worse off between you get paid with a 1099 and you get paid by check or credit card o retc. On the contrary, this is not your case( because you are already self-employed sole proprietorship, single member LLC even just like an independent contractor), If there are no related business expense related to this 1099-Misc Income, than you have to report this amount on 1040 line 21 page 1, under Other income section that is subject to S/E taxes.
Here you will have to pay the 15.3% SE tax and have the income all be subjected to your regular tax at your tax bracket on the gross income on the 1099 MISC, not on net income. So, in this case, you are really worse off.