What are passthrough entity investments and why do they take longer?
Some deals may choose to acquire indirect shares of the underlying company via an SPV or fund. These "upstream" entities from which exposure is purchased are almost always considered passthrough entities for tax purposes. In order for us to produce your K-1, we first need to receive the upstream entity's K-1 issued to the deal vehicle.
When we receive that upstream K-1 is entirely outside of our control. By IRS rules, the upstream entity has until March 15 to produce their K-1s, and they have the right to file for a 6-month IRS extension. In a worst-case scenario, this means we may not receive the upstream entity's K-1 until September 15.
This is a standard occurrence in venture investing, and your CPA should be well-equipped to advise on how to plan around it (e.g., filing your own extension). Your Tax Center will always reflect the most current estimated delivery dates as we learn more.
To combat these delays that are outside of our control, Seed Labs often issues estimated K-1s in advance of the final K-1s.
Understand what tax estimates are, how to use them, and when to expect your final K-1.
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