How to Fill Out and File Schedule B-1 (Form 1065): Ownership and Filing

Schedule B-1 (Form 1065) is the attachment a partnership uses to name every entity, individual, or estate that owns 50 percent or more of its profit, loss, or capital, counting both direct interests and interests attributed through the constructive ownership rules.¹ It is a one-page form, but the ownership math behind it can push people over the threshold whose names appear on far fewer shares than that. Schedule B-1 is never filed by itself; it rides along with the partnership’s Form 1065, due March 15 for calendar-year partnerships.

When You Have to File It

Form 1065’s own Schedule B asks two ownership questions. Question 2a asks whether any entity — a corporation, another partnership, a trust, a tax-exempt organization, or a foreign government — owned 50 percent or more of the partnership’s profit, loss, or capital at any time during the year. Question 2b asks the same about any individual or estate.² A “Yes” to either one triggers Schedule B-1.³

The 50 percent test runs against three measures separately: profit, loss, and capital. Check each one at the end of the tax year. If any owner reaches 50 percent on any single measure, the answer is “Yes,” and the maximum percentage you later report on the form is the highest of those three figures.⁴

Filling Out Part I: Entity Owners

Part I is for any qualifying entity: domestic or foreign corporations, other partnerships (or anything taxed as a partnership), trusts, tax-exempt organizations, and foreign governments.³ For each one, complete five columns:

Column (i), name of entity: the legal name as it appears on that entity’s own tax filings.
Column (ii), employer identification number: the EIN if the entity has one. Foreign governments and certain foreign entities may not have a U.S. EIN.
Column (iii), type of entity: corporation, partnership, trust, tax-exempt organization, or foreign government.
Column (iv), country of organization: the country where the entity was incorporated or organized.
Column (v), maximum percentage owned: the highest of the entity’s profit, loss, or capital percentage at year end, combining direct and indirect ownership.

Three special rules bend who actually goes on the line. If the entity is a member of an affiliated group filing a consolidated return, list the parent corporation rather than each subsidiary. If a disregarded entity such as a single-member LLC holds the partnership interest, list the entity that owns the disregarded entity. And if that owner turns out to be an individual, report them in Part II instead of Part I.³

Filling Out Part II: Individuals and Estates

Part II covers any individual or estate that meets the 50 percent threshold. It uses four columns:³

Column (i), name: the full legal name of the individual or estate.
Column (ii), identifying number: a Social Security number for an individual, an EIN for an estate.
Column (iii), country of citizenship: the individual’s citizenship, or the decedent’s citizenship for an estate.
Column (iv), maximum percentage owned: the highest of profit, loss, or capital percentage, including direct and indirect ownership.

The percentage in column (iv) has to reflect constructive ownership, not just what the person holds in their own name.

Counting Indirect Ownership

The 50 percent test is not limited to direct holdings. The IRS applies the constructive ownership rules of IRC Section 267(c), other than paragraph (c)(3), to decide who crosses the line.⁴ Two attribution paths do most of the work.

Entity attribution treats an interest held by a corporation, partnership, estate, trust, or tax-exempt organization as owned proportionately by its shareholders, partners, or beneficiaries. If Corporation X owns 80 percent of the partnership and you own half of Corporation X, you are treated as owning 40 percent of the partnership through that chain.⁴

Family attribution treats an individual as owning any partnership interest held by a spouse, sibling, ancestor (parent, grandparent), or lineal descendant (child, grandchild). It carries one important limit: family attribution only applies to a person who already owns some interest in the partnership, either directly or indirectly through an entity. A relative’s holdings alone cannot pull someone with zero interest of their own into 50-percent-owner status.⁴

To run the test, add each owner’s direct and indirect percentages on each of the three measures. If any total hits 50 percent, that owner belongs on Schedule B-1. Getting this calculation wrong is the most common reason a Schedule B-1 comes back incomplete, or gets skipped when it should not have been.

How and When to File

Attach Schedule B-1 to Form 1065 and file them together.³ Form 1065 is due the 15th day of the third month after the partnership’s tax year ends, which is March 15 for calendar-year partnerships. Form 7004 gives an automatic six-month extension, moving the deadline to September 15.⁵

Electronic filing is mandatory for any partnership that files 10 or more returns of any type during the year, counting income, employment, excise, and information returns together. Partnerships with more than 100 partners must e-file regardless.⁴ Smaller partnerships can still file on paper.

Before you send the return, cross-check Schedule B-1 against the answers on Form 1065’s Schedule B. A “Yes” to question 2a should produce at least one entity in Part I; a “Yes” to question 2b should produce at least one name in Part II. A mismatch is an easy way to draw an IRS notice.

What Happens If You Skip It

There is no standalone penalty for leaving Schedule B-1 off. The exposure comes through Form 1065: an incomplete Schedule B-1 makes the partnership return incomplete, and the late or incomplete filing penalty is heavy. For returns due after December 31, 2025, the failure-to-file penalty is $255 per partner per month (or partial month) the return is late, capped at 12 months.⁶

A partnership can ask the IRS to abate the penalty for reasonable cause, meaning the failure was not due to willful neglect. The IRS looks at the facts case by case, weighing whether the partnership tried to file on time, used extensions when it could, had a clean prior compliance record, and fixed the problem quickly.⁷ First-time filers, and partnerships that can point to circumstances outside their control such as a preparer failure, tend to have the stronger arguments.

Records to Keep

Hold on to the completed Schedule B-1, the partnership agreement you used to determine ownership percentages, and the calculations behind any constructive ownership analysis. The IRS generally expects records to be kept for at least three years from the date the return was filed.⁸ When ownership percentages sit close to the 50 percent line, keep the work papers. If the IRS later questions whether Schedule B-1 was required at all, you will want to show exactly how the numbers came together.

1
Internal Revenue Service. About Form 1065, U.S. Return of Partnership Income
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Internal Revenue Service. 2025 Instructions for Form 1065
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Internal Revenue Service. Schedule B-1 (Form 1065)
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Internal Revenue Service. Instructions for Form 1065 (2025)
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Internal Revenue Service. Publication 509 (2026), Tax Calendars
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Internal Revenue Service. Failure to File Penalty
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Internal Revenue Service. Penalty Relief for Reasonable Cause
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Internal Revenue Service. How Long Should I Keep Records?