Profit sharing is a pay mechanism that ties a business’s performance to its employee’s pay. It refers to payments made to individuals in proportion to the business’s earnings.
Policy indicates S corporations, general and limited liability partnerships, or limited liability corporations might pay a profit share.
Determining the Partnership Type or LLC Member Status
Consult line G on the Schedule K-1 (Form 1065) to see if a client is a general partner/a LLC member-manager or a limited partner/other LLC member.
Profit sharing income appears on the client’s tax return. Consult line 1 on the Schedule K-1 to locate this income.