Instructions For 1120s. Instructions For Form 1120s: Fill & Download for Free

For tax purposes, how you handle this depends on the business structure and on when you make changes to the distribution of equity among the partners.If you are set up as an S-corporation, each shareholder's distributive share of the company's income has to be computed separately based on his/her individual holding in the company on each day of the tax year; see the specific instructions for Schedule K-1, Information about the Shareholder, in the Instructions for Form 1120S (2012). The extent to which this can become complicated depends on how often equity percentages change over the course of the tax year; I would think that the less often you make grants of equity, the easier it will be to keep track of this information for tax purposes, but that might defeat the intended purpose of the "Grunt Fund".If you are set up as a partnership, you can specify a method for computing each partner's distributive share of profits and losses in the partnership agreement - you could, in principle, specify that the percentages will be based on the dynamic equity relationship among the partners as of the end of the business's tax year, or some other date certain. You are only required to report the percentages as of the beginning of the tax year, and of the end of the tax year, on the partner's Schedule K-1. Whatever method you use must be consistent with the partnership agreement, and applied consistently from year to year. The IRS will respect partnership allocations as long as they reflect the true economic interests of each partner in the partnership, and since the "Grunt Fund" is an approach that attempts to be very accurate in quantifying each partner's contributions to the partnership, I can't imagine that the IRS would override any partnership decisions on allocation that were based on it.

You should be able to do it . There is a "Shareholder's Instructions for Schedule K-1 Form 1120S". Pages 2 and 3 should be helpful.

I am not sure. Are you filing in the USA or India? Domestic corporations use this form to:Report their income, gains, losses, deductions, credits.Figure their income tax liability.Here is a website that may help you determine if you must file a Form 1120 and the appropriate schedule. The Website is: https://www.irs.gov/pub/irs-pdf/i1120.pdfIf you have an S corporation, you may be interested in the following information: In most cases, an S corporation doesn’t pay tax on its income. Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro-rata share. Schedule K-1 (Form 1120S). An S corporation must file a return on Form 1120S, U.S. Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Keep Schedule K-1 (Form 1120S) for your records. Don’t attach it to your Form 1040, unless you’re specifically required to do so. For more information on S corporations and their shareholders, see the Instructions for Form 1120S.If you do NOT have an S corporation you may find additional information at this website: https://www.irs.gov/forms-pubs/about-form-1120.I hope you find this information helpful.