What Percentage of Ownership Is Required to File Business Tax Returns on a Schedule K-1 Business?

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The operating structure of your business determines which tax forms you file to the Internal Revenue Service. An S corporation and limited liability company are the only forms of business that have to file Schedule K-1. An S corporation must file Schedule K-1 for every shareholder, regardless of whether that person owns 1 percent or 50 percent of the business. The same applies to a limited liability company that elects an S corporation designation. However, owners of an S corporation or LLC are not required to file Schedule K-1 with their tax returns.

Schedule K-1

According to the IRS, a corporation uses Schedule K-1 "to report your share of a corporation's income (reduced by any tax the corporation paid on the income), deductions, credits, etc." It is the responsibility of the corporation to report this information for every shareholder. Schedule K-1 does not show dividend distributions. For dividends totaling $10 or more, the corporation must provide you with Form 1099-DIV, Dividends and Distributions. Ordinarily, you are not required to file Schedule K-1 with your tax return, but you should keep it for your records. However, if the corporation reported backup withholding for you, which it reports in box 13 using code O -- for foreign trading gross receipts -- you have to include Schedule K-1 with your return.

S Corporation

An S corporation is a special type of corporation that falls under Subchapter S of the Internal Revenue Code. An S corporation does not pay federal income taxes as long as it meets several requirements such as having no more than 100 shareholders. The IRS refers to an S corporation as a "pass-through" entity, because it passes along its profits and losses to its shareholders. As such, an S corporation is required to file Schedule K-1 for every shareholder in the company.

Limited Liability Company

An LLC is another type of pass-through entity. An LLC has the option of filing as a sole proprietorship, as a partnership, S corporation or C corporation. If the LLC elects an S corporation designation, it must file schedule K-1 to the IRS and provide copies to its members who are owners of the LLC, which they use when filing their personal tax returns.

Other Tax Forms

Shareholders in an S corporation or LLC filing as an S corporation must use Schedule E on IRS Form 1040. In addition, an S corporation and LLC must file Form 1120S, which is an informational return to the IRS.

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