K1 vs. W2

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

2yrs ago

K1 vs. W2

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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reply by a professional 2yrs ago
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.

reply by a searcher 2yrs ago
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.