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Ely
Ely, Attorney
Category: Business Law
Satisfied Customers: 101985
Experience:  Counselor at Law.
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I was part of startup in 2012 and own 1.84% equity. Company

Customer Question

Hi
I was part of startup in 2012 and own 1.84% equity. Company ran out of funds. Founder of the company sent an email asking us to pitch in for getting K1s made by an accountant. I am not comfortable paying hundreds of dollars for getting my K1s. Isn't the owner responsible to pay for K1s. Is this legal?
What are my options? Can I refuse to pay for getting K1s by accountant ?
Submitted: 1 year ago.
Category: Business Law
Expert:  Ely replied 1 year ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

I am sorry to hear about this situation. The K1 A tax document is used to report the incomes, losses and dividends of a business's partners or S corporation's shareholders. Unless the contract between the shareholder and the company specifies that the shareholder pays for the K1, the shareholder does not have to do so. The company must send out the K-1 forms to shareholders by March 15th, regardless. It is the company's duty to do so.

So yes, a shareholder may refuse to pay their share for the K-1 report assuming that the contract does not mandate this. But if so, this may possibly build ill-will between the parties since the company is out of money and relationships may be strained.

I hope this helps and clarifies. Please use the SEND or REPLY button to keep chatting, or please RATE when finished. You may always ask follow ups at no charge after rating. Kindly rate my answer as one of TOP THREE FACES/STARS and then SUBMIT, as this is how experts get credit for our time. Rating my answer the bottom two faces/stars (or failing to submit the rating) does not give me credit and reflects poorly on me, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith with a positive rating.

Customer: replied 1 year ago.
What should I do if the company doesn't send K1 by March 15th?
Expert:  Ely replied 1 year ago.

As a shareholder, one can technically file a Writ of Mandamus in court to force the company to do so.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
We didn't make money in 2014 and 2015. I have K1 from 2014. Can I use 2014 K1 for filing my taxes?
Expert:  Ely replied 1 year ago.

This is more of a question for a CPA, but generally speaking, no. One's tax prepaper would rather have no K1 at all, as opposed to using an old K1. There are contingencies that the tax payer can use if their company fails to provide a K1.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.