K1 vs. W2

searcher profile

August 14, 2023

by a searcher from IESE Business School in Denver, CO, USA

For traditional searchers has anyone filed a K1 for themselves or only for investors? It seems the norm is for searchers to file W2s and be considered employees. My main question is: is there any benefit to the fund or the searchers from filing a K1 vs a W2? If you can pass through losses during the search phase then it seems a K1 would be the way to go, but not sure if that's allowed. I understand to file a K1 you have to be invested in the fund yourself.

Any clarification would be helpful!

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commentor profile
Reply by a searcher
from University of Texas at Austin in Dallas, TX, USA
As Robert mentioned, at least in the US, you cannot receive both a K-1 AND and W-2 from the same entity (assuming it is an LLC or LP that is not taxes as an S-Corporation). My recommendation would be to talk to your CPA or tax advisor and if you don't have one, this is the kind of thing that they can be very helpful with.
commentor profile
Reply by a professional
from Walsh College of Accountancy and Business Administration in Detroit, MI, USA
Partners in partnerships cannot receive a W2. There are ways to get around this if helpful, but it rarely makes sense. Further, there are other tax reasons for the Searcher to receive a K-1.
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