Schedule K-1

Schedule K-1 is the slip of paper that connects a partnership's tax return to its owners. A multi-member LLC files one Form 1065 for the company, then prepares a separate Schedule K-1 for each partner showing that partner's slice of the results: profit or loss, capital contributed and withdrawn, and other items like interest or guaranteed payments. The K-1s are part of the Form 1065 package, due March 15 for a calendar-year LLC.

The key idea is that the K-1 reports your share of profit, not the cash you took out. Suppose two founders in Sri Lanka and Dubai own a US LLC 60/40, and the company earns $50,000. The K-1s show $30,000 and $20,000, even if the partners left every dollar in the company bank account. The partnership itself pays no US income tax; the K-1 pushes each share out to the partner level.

For a non-resident partner, the K-1 is usually the trigger for personal US paperwork. If the LLC has US business income, the foreign partner generally files Form 1040-NR reporting the K-1 amounts, which requires an ITIN. The partnership may also have to withhold tax on the foreign partner's share under section 1446 and report it on Forms 8804 and 8805, so the K-1 rarely travels alone.

Deadlines and penalties make the K-1 worth taking seriously. A late Form 1065, including missing K-1s, costs $255 per partner per month in 2026, so a two-partner LLC that files five months late owes $2,550. Compare that with a single-member LLC, which issues no K-1s at all and instead files Form 5472 with a pro forma Form 1120 by April 15, where the penalty for skipping is $25,000.