Does a C-Corp Really Issue a K-1? – Avoid this Mistake + FAQs

No – a C Corporation does not issue Schedule K-1s to its shareholders.

A C corp is taxed as a separate entity and files its own tax return (Form 1120), so it doesn’t pass income through via K-1s.

What you’ll learn in this article:

• The basics of C Corporations: What a C corp is, how it’s taxed, and why it doesn’t use K-1 forms.

• Who does get K-1s: Learn which entities (S corps, partnerships, LLCs, trusts) issue Schedule K-1s and how those work.

• Federal vs. state tax differences: How state rules can differ (with a 50-state table of corporate tax and K-1 nuances).

• Pros and cons: A quick comparison of C corp taxation versus pass-through entities, to help you choose the right structure.

• Avoiding common mistakes: Real-world examples of business owners confusing entity types and tax forms, plus key terms and an FAQ to clear up any remaining questions.

C Corporation Pros and Cons at a Glance

Starting a business means picking a structure that fits your goals. If you’re weighing a C corporation against pass-through options (like S corps or partnerships), consider these pros and cons:

Now, let’s dive deeper into how C corps work and why they differ from entities that issue K-1s.

What Is a C Corporation? (Definition & Taxation) 💼

A C Corporation is a standard corporation type that is taxed as a separate legal entity. This means the corporation itself pays income tax on its profits. A C corp files a corporate tax return each year (Form 1120) and pays taxes at the federal corporate rate (21% as of recent years). Shareholders of a C corp are generally not taxed on the company’s profits unless those profits are distributed to them.

Double taxation: C corps face what’s known as “double taxation.” First, the corporation pays corporate income tax on its earnings. Then if it distributes some of those earnings to owners as dividends, the shareholders pay personal income tax on those dividends.

For example, if XYZ Corp (a C corp) has $100,000 in profit, it pays corporate tax on that amount. If it then pays a dividend to you as a shareholder, you’ll receive a Form 1099-DIV for the dividend and owe personal tax on it – even though XYZ Corp already paid corporate tax on the profit.

On the other hand, earnings that are kept in the corporation (retained earnings) are only taxed at the corporate level for now. This can be a strategy for growing businesses: the company reinvests profits and delays paying out dividends, potentially taking advantage of the flat 21% corporate tax rate (which may be lower than some owners’ individual tax rates).

However, if those retained profits are eventually paid out as dividends in later years, the shareholders will then incur tax on them at that time.

Ownership and filings: C corporations can have unlimited shareholders (including other companies or foreign investors), and can offer multiple classes of stock. They are the only type of corporation eligible to become publicly traded.

Every year, a C corp must file a Form 1120 federal tax return, plus any required state corporate tax returns. Shareholders don’t receive a Schedule K-1 from a C corp. Instead, if you’re a shareholder, you might see income from the company in other ways:

• W-2 if you are also an employee drawing a salary from the corporation.

• Form 1099-DIV if you received dividends.

• Form 1099-INT if the corporation paid you interest (for example, on a shareholder loan).

• Form 1099-B if you sold your stock (through a broker, reflecting proceeds of stock sales).

In summary, a C corporation is a separate taxpayer in the eyes of the IRS. It pays its own taxes via Form 1120, and shareholders are only taxed on money they actually receive (like wages or dividends). Next, we’ll explore why this means no K-1 forms for C corp owners – and what forms they get instead.

Why C Corporations Don’t Issue K-1s 📝

A Schedule K-1 is a tax form used to report an individual owner’s share of income from a pass-through entity. Pass-through entities (like S corps, partnerships, and certain trusts) pass their profits and losses directly to their owners’ personal tax returns.

In those businesses, the entity itself typically doesn’t pay federal income tax – instead, each owner pays tax on their share of the profits. The K-1 forms are the mechanism for reporting each owner’s piece of the pie.

A C corporation, however, is not a pass-through entity. As we learned above, a C corp pays its own taxes on corporate income. Because the profits aren’t automatically passed through to shareholders for tax purposes, there’s no need for a K-1 form.

The shareholders of a C corp are not individually responsible for reporting the corporation’s earnings on their personal returns (unless those earnings are distributed as dividends or wages).

In practical terms:

• C corp taxes: The company files Form 1120 with the IRS and pays corporate tax on its income. This form is solely for the corporation’s use and is not a schedule that flows to individual returns.

• No K-1s to shareholders: Since shareholders don’t directly pay tax on the corporation’s profits, they do not get a Schedule K-1 from a C corp. Instead, if you’re a C corp owner, you’ll only report income you personally received (like salary or dividends as mentioned earlier).

• Information flow: For an S corporation or partnership, the business files an informational return and issues K-1s to owners showing each person’s share of income, deductions, etc., which the owners then use on their own 1040 forms. In contrast, a C corp’s Form 1120 is a standalone tax return – nothing from it flows through to a personal 1040 via K-1.

To avoid confusion, remember this handy rule: Only pass-through entities issue K-1s. If your business is a taxable corporation (C corp), it will never issue a K-1 to its shareholders. If you’re holding a K-1 in your hand, it means you have income from a partnership, S corp, trust, or similar pass-through venture – not a traditional C corporation.

(Note: One exception to be aware of – if a C corporation is a shareholder in a partnership or investor in an S corp, the C corp itself might receive a K-1 from that investment, but it still wouldn’t issue K-1s to its own shareholders. That scenario is beyond the scope of most small businesses, but it highlights that K-1s are tied to the pass-through entity type, not the C corp itself.)

Which Business Entities Issue K-1s? 📑

If C corps don’t issue K-1s, who does? Let’s look at the types of entities that provide Schedule K-1 forms to their owners. These entities are all forms of pass-through businesses, meaning the business’s income “passes through” to the owners to report on their personal tax returns:

S Corporations (Form 1120-S & Schedule K-1)

An S Corporation is a corporation that has elected to be taxed under Subchapter S of the IRS Code (unlike a C corp which is Subchapter C). S corps do not pay federal income tax at the corporate level. Instead, they file an informational return (Form 1120-S) and issue a Schedule K-1 to each shareholder. The K-1 reports each shareholder’s share of the company’s profits, losses, deductions, and credits.

• K-1 to shareholders: If you own, say, 25% of an S corp, you’ll receive a K-1 showing 25% of the company’s taxable income (or loss) for the year, along with 25% of any specific items like charitable deductions or capital gains. You use this K-1 to report those amounts on your personal 1040.

• No corporate tax: The S corp itself generally doesn’t pay federal tax (one exception: S corps with prior C corp earnings or certain built-in gains might pay a small entity-level tax, but this is specialized). The income is taxed on the owners’ returns via the K-1s.

• Limitations: S corporations are limited to 100 shareholders (all must be U.S. citizens/residents or certain trusts) and one class of stock. These restrictions are the trade-off for avoiding the double taxation of a C corp.

Partnerships & LLCs (Form 1065 & Schedule K-1)

Partnerships (including general partnerships, limited partnerships, and most multi-member LLCs) are classic pass-through entities. A partnership files an annual informational return (Form 1065) with the IRS. Along with that return, it issues a Schedule K-1 to each partner, detailing that partner’s share of the partnership’s income, deductions, and credits.

• LLCs and K-1s: An LLC (Limited Liability Company) is not a specific tax classification by itself – it’s a legal structure. By default, a multi-member LLC is taxed as a partnership, so it will file Form 1065 and give out K-1s to its members (owners). A single-member LLC is disregarded for tax purposes (treated as part of its owner’s personal return), so it does not issue a K-1 either – instead, a single-member LLC’s income is typically reported on Schedule C of the owner’s 1040.

• K-1 allocations: Partnership K-1s can be more complex because partnership agreements may allow special allocation of income or losses not strictly proportional to ownership percentage (as long as IRS rules are met). But in simple terms, if you’re a 50% partner in a two-person partnership, your K-1 will show 50% of the partnership’s taxable income or loss.

• Self-employment tax: One key difference – income passed through to general partners or LLC members active in the business may be subject to self-employment tax (Social Security/Medicare), whereas S corporation K-1 income is not directly subject to self-employment tax (S corp owners instead pay themselves a salary subject to payroll tax, and remaining profit distributions avoid self-employment tax).

Trusts & Estates (Form 1041 & Schedule K-1)

It’s not only operating businesses that use K-1s. Trusts and estates that distribute income to beneficiaries also issue Schedule K-1 (from Form 1041). For example, if a family trust earns income and passes it to the beneficiaries, the trust will send each beneficiary a K-1 showing the income they must report. The trust itself only pays tax on any income it retains.

While trusts and estates aren’t business entities, it’s useful to know that K-1s can come from these sources too. Many individuals first encounter a K-1 not through a business partnership, but via an inheritance or family trust distribution.

Why Pass-Through Entities Use K-1s (and C Corps Don’t)

The common thread among all K-1 issuers is pass-through taxation. The IRS Schedule K-1 is essentially a report card of income for each owner to include in their own tax filing. S corps, partnerships, LLCs, and trusts use K-1s because they are conduits of income to others. A C corp stands apart because it’s a tax container all by itself – it contains the income and pays taxes internally, so there’s nothing to pass through to individual returns via K-1.

If you’re unsure about your entity type, check what kind of tax return it files:

• Form 1120 (Corporation) – No K-1s to owners.

• Form 1120-S (S Corporation) – K-1s issued to each shareholder.

• Form 1065 (Partnership/LLC) – K-1s issued to each partner/member.

• Form 1041 (Trust/Estate) – K-1s issued to beneficiaries for distributed income.

Understanding these distinctions can help you avoid misfiling your taxes or expecting the wrong paperwork. Next, we’ll explore how things get more interesting when considering state tax rules for these entities.

Federal vs. State Tax: 50-State Comparison 🌐

Federal tax law is uniform across the country – a C corp is taxed as a separate entity everywhere in the U.S. for federal purposes, and an S corp or partnership is a pass-through for federal taxes. However, state tax laws can differ significantly. Each state has its own rules for corporate taxation and whether it honors S corporation pass-through status. Here are some important nuances:

• States without corporate income tax: A handful of states (for example, Nevada, South Dakota, Wyoming) do not levy a state corporate income tax at all. Some others (like Texas, Washington, Ohio) have no corporate income tax but impose a gross receipts or franchise tax on businesses. In these states, the distinction between C and S corp matters less for state income tax – because there is no state income tax on corporations to begin with. (Businesses might still pay other state taxes.)

• States that don’t recognize S corps: A few jurisdictions tax S corporations just like C corps, meaning the S election is not recognized for state taxes. Historically, New Hampshire, Tennessee, and the District of Columbia fall in this category (and in these places, S corp profits can end up effectively double-taxed at the state level). If you form an S corp in those places, you’ll still file as an S corp federally, but for state purposes you may have to file and pay taxes as a C corp.

• States with partial pass-through taxation: Many states recognize S corp status but still charge a nominal tax or fee at the entity level. For instance, California imposes a 1.5% franchise tax on an S corporation’s net income (with a minimum $800 fee each year) even though the income also passes through to shareholders. Illinois charges S corps a replacement tax of 1.5% of net income. New York and New Jersey require S corporations to pay a corporate-level tax (NY’s is a fixed fee or minimal tax in most cases, while NJ imposes its regular corporate tax rates on S corps). Massachusetts taxes S corps on profits above a certain threshold. These are examples where an S corp does get some pass-through treatment, but not as completely as at the federal level.

• Most states follow federal treatment: Apart from those exceptions, the majority of states with a corporate income tax allow S corporations and partnerships to avoid entity-level taxation – the income is taxed only on the owners’ personal returns. They might still require the business to file an informational return and provide K-1s to owners for state reporting, but they don’t double-tax the profit.

To give you a clearer picture, here’s a state-by-state breakdown of corporate income tax and how each state treats S corporations (pass-through or not). This can help you identify if your state has any special rules:

(Tax rates are as of 2024–2025. “Yes” under S Corp Taxation means the state generally does not tax S corporation income at the corporate level, i.e. true pass-through treatment. “Partial” means the state imposes some tax or fee on S corporations despite pass-through status. “No” means the state does not recognize the S election and taxes the corporation fully.)

As you can see, state rules can add complexity. Always check your state’s requirements so you don’t get a surprise tax bill. For example, a new business owner might form an S corp to avoid double taxation, only to find their state still charges the company tax on its earnings (as in California or New Jersey). On the flip side, in states with no income tax, an S corp won’t save any state tax (because there’s none to begin with, though other taxes like gross receipts might apply equally). Keeping these nuances in mind will help you make informed decisions about where and how to incorporate.

⚠️ Common Mistakes with Business Entities and Tax Forms

Even savvy entrepreneurs can slip up when it comes to choosing the right entity or filing the correct forms. Here are some frequent mistakes and misconceptions to watch out for:

• Mixing up LLCs, S Corps, and C Corps: Many assume an LLC is automatically the same as an S corp or C corp for taxes. In reality, an LLC with one owner is taxed like a sole proprietorship (no K-1, just a Schedule C), and an LLC with multiple owners is taxed as a partnership by default (issuing K-1s). You have to actively elect S corp status (via IRS Form 2553) if you want your LLC or corporation to be treated as an S corp. Failing to understand this can lead to filing the wrong tax return.

• Not filing the S corp election on time: A common blunder is forming a corporation (or LLC) and assuming it’s an S corp without submitting the required election form. If you miss the deadline (generally within 2½ months of formation or by March 15 for existing entities wanting S status for that year), your company will be a default C corporation. The result? You expected pass-through taxation and a K-1, but end up with a C corp tax bill and no K-1. Always confirm your S corp election acceptance from the IRS.

• Using the wrong tax form for your entity: Business owners sometimes file an incorrect return – for example, filing Form 1120 (C corp return) for an S corp or vice versa. Each entity type has a specific form: Form 1120 for C corps, Form 1120-S for S corps, Form 1065 for partnerships/most multi-member LLCs. Filing the wrong one can lead to IRS penalties or an inadvertent change in how you’re taxed. When in doubt, double-check your IRS approval letters or consult a tax professional to ensure you’re using the right form.

• Expecting a K-1 when you shouldn’t (and vice versa): New business owners often get confused about which forms they’ll receive. Example: If you own shares in a C corp, you won’t get a K-1 – your income from the company might come as a W-2 salary or dividends (1099-DIV). Conversely, if you’re a partner in an LLC/partnership, don’t expect a W-2 for your share of profits – you’ll get a K-1. Understanding your entity’s nature helps set the right expectations.

• Ignoring state-specific requirements: Another trap is assuming the federal rules cover everything. You might diligently file your federal S corp return and K-1s, but forget that your state (like California or New York) requires a separate payment or filing for S corps. Or you might not realize an LLC owes an annual franchise tax or report to the state. Always keep an eye on both IRS rules and your state’s rules for your entity type to avoid unpleasant surprises.

• Mishandling owner payments and forms: Business owners sometimes take money out of their company the wrong way, leading to tax form mistakes. For instance, S corp owners must pay themselves a reasonable salary (W-2) in addition to taking profit distributions (via K-1). If an S corp owner tries to take all income as distributions to avoid payroll taxes, it’s a mistake that can trigger IRS scrutiny. On the flip side, partners in a partnership should not be on payroll – if you put a partner on a W-2, that’s incorrect (partners get draws and K-1s, not wages).

By being aware of these common pitfalls, you can take steps to avoid them. Choosing the right entity at the start (with professional advice), keeping track of required IRS filings, and staying organized with deadlines will help you steer clear of costly errors.

📚 Key Terminology for Business Taxes

Understanding the lingo is half the battle. Here are some key terms we’ve discussed, defined in plain English:

• C Corporation (C corp): A standard corporation subject to corporate income tax (separate from its owners). “C” refers to the subchapter of the tax code. A C corp files Form 1120 and does not pass income directly to shareholders for tax purposes.

• S Corporation (S corp): A corporation (or LLC electing this status) that has qualified for pass-through taxation under Subchapter S of the tax code. An S corp files Form 1120-S and issues Schedule K-1s to its shareholders, passing its income and deductions through to them.

• Schedule K-1: A tax schedule used to report an individual owner’s share of income from a pass-through entity (like an S corp, partnership, or trust). The K-1 provides the details each owner needs to include on their own tax return. C corp shareholders do not receive K-1s.

• Form 1120: The U.S. Corporation Income Tax Return. This is the form a C corporation files annually to report its income, deductions, and tax liability. It’s a stand-alone return (no flow-through to personal taxes).

• Form 1120-S: The U.S. Income Tax Return for an S Corporation. An S corp files this instead of Form 1120. The 1120-S itself doesn’t calculate a tax due (since the S corp generally doesn’t pay tax); instead, the profits are broken out into K-1 schedules for each shareholder.

• Form 1065: The U.S. Return of Partnership Income. Filed by partnerships and multi-member LLCs, it reports the business’s income and then provides each partner with a Schedule K-1 for their share.

• Shareholder: An owner of a corporation (C or S corporation). Shareholders in a C corp pay tax only on what the corporation distributes to them (like dividends or wages). Shareholders in an S corp pay tax on their share of the company’s profits as reported on a K-1, regardless of actual distributions.

• Partner: An owner of a partnership. Partners receive K-1s from the partnership and must report the partnership income on their personal taxes, whether or not the money was actually paid out to them. (General partners’ income from a partnership is usually subject to self-employment tax.)

• Member: An owner of an LLC. LLC members can be treated as partners (if the LLC is taxed as a partnership), shareholders (if the LLC elects S corp or C corp taxation), or even sole proprietors (if single-member LLC with default disregarded status). “Member” is essentially the LLC’s term for an owner, whose tax treatment depends on the LLC’s chosen classification.

• Pass-Through Entity: A business that does not pay income tax itself, but instead “passes through” its income to be taxed on the owners’ personal returns. Examples are S corps, partnerships, and LLCs taxed as such. Pass-through entities issue K-1s to report each owner’s share. (Contrast with a C corp, which is not pass-through and pays its own tax.)

• Double Taxation: The phenomenon where the same income is taxed twice. In C corps, profits are taxed at the corporate level, and then again at the individual level if those profits are distributed as dividends to shareholders. Pass-through entities avoid double taxation – their income is taxed only once, at the owner level.

• Entity Classification (for tax): How a business entity is categorized for tax purposes. This determines which tax form is filed and how/if income is passed to owners. For example, a single-member LLC’s classification is “disregarded entity” (treated as part of the owner’s personal taxes), a multi-member LLC is classified by default as a partnership, and a corporation is classified as a C corp unless an S election is made. The classification is crucial because it dictates whether a K-1 is used and how the business’s profits are taxed.

Having these terms under your belt will make it easier to navigate tax discussions and filings. Next, let’s look at a couple of real-life scenarios where business owners got tripped up and how they resolved it.

🔍 Real-World Examples of Tax Form Mix-Ups

Sometimes the best way to understand these concepts is through real-life stories of entrepreneurs who ran into tax form troubles and how they solved them.

Example 1: The Misclassified Corporation

The scenario: John started a tech startup as a corporation in early 2024. He heard that S corporations avoid double taxation, so he assumed his new corporation would automatically be treated as an S corp. He paid himself a modest salary through the year and expected to receive a K-1 for his share of the company’s profits. However, tax time arrived and his accountant delivered a surprise: John’s company was still a C corporation because he never filed the S corporation election (Form 2553) with the IRS.

The problem: Because the S corp election wasn’t in effect, the company’s profit would be taxed at the corporate level on Form 1120, and John wouldn’t get a K-1 at all. Instead, any distribution he took might be treated as a dividend (taxable to him without a deduction to the company). John essentially had a C corp when he meant to have an S corp, and now faced a corporate tax bill he didn’t anticipate.

The resolution: John’s accountant helped him file a late S corporation election request with an explanation (the IRS often grants relief for a late election if it was unintentional and the entity otherwise qualifies). They reclassified the corporation as an S corp effective late 2024, so going forward John’s company would be a pass-through and issue K-1s. The lesson John learned was to formally elect S corp status on time; simply forming a corporation doesn’t make it an S corp without that IRS paperwork. Had he consulted a tax advisor at startup, he would have saved a lot of hassle and avoided the unexpected C corp taxes for that first year.

Example 2: The LLC & 1099 Mix-Up

The scenario: Sara and Mike formed a two-member LLC for their consulting business. They didn’t choose any special tax status, so by default their LLC was a partnership for tax purposes. Throughout the year, Sara took draws of profit from the business, and Mike did the same. Come January, Sara, not fully understanding the process, issued a Form 1099-MISC to Mike for the amount of money he had withdrawn from the business, thinking this was how to report his earnings to the IRS.

The problem: In a partnership (which is what their LLC was for tax purposes), partners are not employees or outside contractors – they are owners. Mike shouldn’t receive a 1099 from his own business. Instead, the LLC needed to file a Form 1065 partnership return and issue a Schedule K-1 to Mike (and to Sara) reporting each of their shares of the partnership’s income. By issuing a 1099-MISC, Sara was essentially mischaracterizing Mike as an independent contractor, which could confuse their tax reporting and potentially lead to duplicate or incorrect income reporting.

The resolution: Their tax advisor caught the mistake during tax prep. The 1099-MISC was voided, and the LLC prepared its partnership return (Form 1065). Sara and Mike each received a Schedule K-1 reflecting the business’s net income split 50/50. They learned that as LLC members (partners), they should ignore the 1099 forms (those are for non-owner payments) and focus on the partnership return and K-1s for reporting their income. Going forward, they kept proper records of each member’s share of profit and made sure to work with a CPA to file the partnership return so that each partner’s K-1 was accurate.

These examples highlight how easy it is to misstep:
John’s story shows the importance of proper entity classification (and timely elections), while Sara and Mike’s story underscores knowing the correct tax forms for your business structure. Fortunately, both cases were fixable, but with a bit of upfront knowledge, the confusion and corrections could have been avoided.

🔗 Connecting the Dots: IRS, SEC, and Your Business Entity

It’s worth understanding how different agencies and concepts intertwine in the life of a business:

• The IRS (Internal Revenue Service) is concerned with how your business is taxed. It classifies your entity (as a C corp, S corp, partnership, etc.) and dictates which tax forms you file. The IRS doesn’t care what you call your company in marketing or legal terms – it looks at the elections and default rules to determine if you’re taxed as a corporation or pass-through. Your obligations like issuing K-1s or paying corporate tax all stem from how the IRS classifies you.

• The SEC (Securities and Exchange Commission) comes into play if your company is issuing securities (stocks, bonds) to the public or a broad base of investors. The SEC is about protecting investors and requires extensive disclosures (like audited financial statements, annual reports such as Form 10-K, etc.) for publicly traded companies. Generally, only C corporations go public or have enough shareholders to trigger SEC oversight. S corporations are restricted in shareholder number and type, so they don’t register with the SEC in the same way. In short: IRS status determines your tax forms, while SEC status (totally separate) would determine your financial reporting obligations if you’re a public company. Don’t confuse a tax form like Schedule K-1 with an SEC form like a 10-K – they serve very different purposes.

• Shareholders, Partners, and Members: These are all terms for business owners, depending on the entity. Shareholders own corporations, partners own partnerships, and members own LLCs. Regardless of the title, all owners ultimately must report their business income to the IRS – the paperwork just differs. For instance, an S corp shareholder reports their share of profit on a K-1 (a C corp shareholder would report dividends or salary instead). A partner in a partnership or an LLC member (in an LLC taxed as a partnership) reports their share of income on a K-1 as well. The type of ownership you have determines which forms you receive, determines which forms you receive.

• LLCs, S Corps, C Corps – interplay: An LLC is created under state law, and it gives flexibility – the IRS can treat it as a disregarded entity, a partnership, or even an S corp or C corp if elections are made. Many small businesses start as LLCs for legal purposes, then elect S corp status to get pass-through tax treatment. If down the line the company seeks venture capital or plans to go public, it may convert to a C corp. Changing the tax classification (with IRS approval) or even the legal structure can happen as a business evolves; importantly, any such change will alter how taxes are handled (for example, you might start or stop issuing K-1s accordingly).

By recognizing these relationships – IRS classification driving taxation, SEC rules affecting public corporations, and the terminology for owners in each structure – you can better navigate decisions about how to structure your business now and in the future. Essentially, choose an entity and tax status that suits your current needs, but be aware of what it entails if your goals (like attracting investors or going public) change.

❓ Frequently Asked Questions (FAQ)

Q: Does a C corporation ever issue a K-1 to its owners?
A: No. C corps do not issue Schedule K-1s. Shareholders of C corporations are typically only issued forms like 1099-DIV for dividends or W-2s for salary, not K-1s.

Q: I’m the sole owner of a C corp. Do I report the company’s profits on my personal tax return?
A: Not directly. As a C corp owner, you only report income you received from the corporation (like your salary or any dividends). The company’s retained profits are taxed at the corporate level, on its own return.

Q: My business is an LLC – will I get a K-1?
A: It depends on how your LLC is taxed. If it’s a single-member LLC (default disregarded entity), no K-1 is issued (income goes on Schedule C of your 1040). If it’s a multi-member LLC taxed as a partnership (default for 2+ members), then yes – each member will receive a K-1 for their share of the LLC’s income.

Q: What tax forms do S corp owners get versus C corp owners?
A: S corporation owners receive a Schedule K-1 each year showing their share of the company’s income. C corporation owners do not get K-1s; they might get a W-2 if they’re an employee and/or a 1099-DIV for any dividends paid out.

Q: Can I switch my company from a C corp to an S corp later on?
A: Yes, if your company meets the qualifications (limits on number and type of shareholders, one class of stock, etc.). You’d file a Form 2553 with the IRS to elect S corp status (often effective at the start of the next tax year). Many businesses start as C corps and later become S corps when it makes tax sense (or vice versa).

Q: If I leave profits in my S corp (don’t distribute them), do I still pay tax personally?
A: Yes. In an S corp (or partnership), owners pay tax on their share of the business’s profits whether or not those profits are distributed. Money left in the company still counts as income to the owners on the K-1. (By contrast, a C corp’s undistributed profits are taxed only at the corporate level until they’re paid out as dividends.)

Q: Is an S corp always better than a C corp for a small business?
A: Not always. S corps avoid double taxation, which is great for many small businesses, but C corps can be advantageous in some cases (e.g. if you want to retain and reinvest profits at a flat 21% tax rate, or if you plan to seek international or corporate investors who can’t invest in S corps). Also, C corps allow more flexibility in ownership and classes of stock. The “better” choice depends on your growth plans, income levels, and goals.

Q: Do partnerships and LLCs issue K-1s like S corps do?
A: Yes. Partnerships (and multi-member LLCs taxed as partnerships) issue K-1s to their partners/members. In fact, K-1s originated with partnerships. Any pass-through entity – be it an S corp, partnership, or trust – will be providing K-1s to its owners or beneficiaries.