LLC 2 member to single member

[Rickie]

My client just informed me that in November 2015 he formed a LLC with his wife, 50/50. His wife does absolutely nothing with the business. After our discussion, he decided it would be best to be a single member. Do I have to report anything to the IRS or State to make this change? Is the State expecting a Partnership Return since the Articles of Organization says 2 members? I want to do a Sch C for him but wondering if there is a way to amend the information he submitted. Anyone know if I can amend the information given to the state or can I just file a Sch C?

[DaveinTexas]

Any activity in 2015?

If there was no activity (no income, no expenses, no credits) then there is no requirement for the taxpayers to file a Partnership Return in 2015 (See page 2 of the 1065 instructions). If there was activity in 2015, then file a Partnership Return; mark it "Initial" and "Final" and you have the IRS taken care of. The IRS really doesn't know what to "expect" until the initial return is filed and remember, the EIN letter (CP575) indicating the taxpayers should file form 1065 is not legally binding but if no tax elections were made the taxpayers might be stuck with the default classification of Partnership.

As for the State, I don't know your state rules but in my great State of Texas an LLC is not a Partnership. A Partnership is not usually formed at the state level unless the client formed a Limited Partnership (LP or LLP) but your state could be different.

I would recommend to the client to consider filing Articles of Amendment to remove the wife as a Member/Manager. This would normally take care of the State. Good luck!!