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Thank you for your question. At the end of the day, though they are actually taxed the same - the people on the 1099 are paying self employment taxes, and instead of having it taken out of the distribution, they are paying it. The guy on the W-2, he'll get a refund of taxes overpaid. So, it's all the same -- it's just the manner in which taxes are withheld. One gets a potential refund from the IRS at the end of the year, the other two have a higher tax to pay with their return.
Please let me know if you need anything additional -- if not, please rate positive.