A viewer asked a question that gets more complicated the more you think about it: when a high net worth individual owns multiple pass-through entities, which K-1s do I actually need to collect?

The honest answer is that it depends, and the right starting point is your institution's guidelines. But guidelines are exactly that — guidelines. They give you a framework, not a formula. Senior Credit Trainers Joe Davis and David Stauffacher talked through how to think about this in a recent livestream, and here is the substance of that conversation.

Does It Matter That the Borrower Is High Net Worth?

Not inherently. The question of which K-1s to collect is less about the borrower's wealth and more about what you are underwriting and why. A few scenarios help clarify the logic.

If you are lending to the entity. If the entity itself is the borrower and it is standing on its own, strong cash flow, solid collateral, established history - you may not need every K-1 from every other business the owner touches. You are underwriting the entity, not a global picture of the owner's financial universe. The personal guarantee is still there, but if the business can clearly service the debt, the other K-1s may add complexity without adding much to your credit decision.

If you are lending to the individual. In a private banking or personal lending context, the picture changes. You are looking at the person's overall financial strength, which means understanding what each entity is contributing or draining from their personal cash flow. K-1s become more important, not less, because they represent real income streams tied to that individual.

If the individual is a passive investor. A K-1 from an entity where the borrower has a passive ownership stake and no active role is a different conversation than a K-1 from a business they are running. Passive income with no operational exposure may not require the same level of scrutiny.

The Practical Reality of Multiple Entities

Here is where it gets interesting. A high net worth borrower with multiple pass-through entities will generate a lot of K-1s. If you want three years of history on each one, you are looking at a significant stack of returns. Most borrowers do not organize these themselves, they hand you whatever their accountant sent them, and they may not know what is included or missing.

That is worth being aware of before you assume you have everything. If the tax return came directly from a CPA, you are more likely to have a complete package. If it came from the borrower, ask whether all K-1s are included.

The reason it matters: each K-1 represents a separate income stream, and potentially a separate cash drain. Businesses support each other more often than formal financial analysis captures. When one entity struggles, owners find a way to prop it up, sometimes from another entity's cash flow, sometimes from personal funds, sometimes without fully realizing which pocket they are reaching into. Having the full picture does not mean you need to underwrite every entity in detail. It means you can see the landscape clearly enough to ask the right questions.

A Framework for Making the Call

When guidelines do not resolve the question, here is a practical way to think through it.

Start with materiality. A K-1 representing a meaningful share of the borrower's income, or a business carrying significant debt, belongs in the analysis. A small passive interest in a profitable entity with no debt may not require full documentation, though you should know it exists.

Consider the stability of the income. Consistent pass-through income over multiple years is more predictable than a single year's number. If you can see trends across a few K-1s without pulling the full entity returns, that may be enough to assess whether the income is recurring and reliable.

Ask yourself what you would do with the information. If getting the K-1 would change your credit decision or require a different underwriting approach, get it. If the loan decision is already well-supported and the K-1 is a marginal data point, you may be adding documentation burden without adding analytical value.

And when in doubt, ask for more rather than less. A borrower who pushes back on providing K-1s is worth noting. One who provides them readily, including for entities you did not specifically request, is giving you a signal about how they approach the relationship.

This Is Where Judgment Comes In

There is no formula here. Newer credit staff often spend time figuring out the difference between what is nice to have and what they actually need. That judgment develops with experience and formal training, but it also comes from talking through real scenarios with more seasoned colleagues. This question is a good example of the kind of thing that lives in the gray, and knowing how to operate there is part of what good credit analysis requires.

The goal is not to collect every document that exists. The goal is to understand the borrower's financial picture well enough to make a sound loan decision, document your reasoning clearly, and be able to defend it if the deal ever comes back for review.