Don't get me wrong, I am always in the market for new clients.
New client owns a baby clothes business---creating and selling. She formed a partnership with her friend in 2003, 50/50 partnership interests. I asked her for a copy of her 2004 1065. The 1065 has the box checked, initial return and final return, hmmm....okay. Also, both of the K1s indicate that both partners are limited partners, hmmm...wonder who the general partner might be? Ahh well, no big deal right? Except the fact that all Texas LPs must have the LLP or the LP in the name of the limited partnership. So, I am thinking it must be a LLC---nope. No franchise tax return was due or filed last year. Add to this frustration that the previous preparer did not keep any records of each partner's basis or capital accounts. Last year's K1s had losses that carried to each partner's personal return, whether they had the basis or not; who knows?
Also add to the frustration that the client tells me she incorporated in Feb 2005 and elected to be taxed as a S corp. It appears that the 2553 was never filed, much to her surprise. She tells me that she bought out her 50% partner and friend, but only after they incorporated.
What to do? Should I go ahead and file the 1065, now late, with income and expenses from Jan to Feb? Then file the 2553 with a late file exception, wait until it is approved and then file the 1120S? Or should I file the 1120 and file for a late 2553 for 2006?
I'm all confused.
New client owns a baby clothes business---creating and selling. She formed a partnership with her friend in 2003, 50/50 partnership interests. I asked her for a copy of her 2004 1065. The 1065 has the box checked, initial return and final return, hmmm....okay. Also, both of the K1s indicate that both partners are limited partners, hmmm...wonder who the general partner might be? Ahh well, no big deal right? Except the fact that all Texas LPs must have the LLP or the LP in the name of the limited partnership. So, I am thinking it must be a LLC---nope. No franchise tax return was due or filed last year. Add to this frustration that the previous preparer did not keep any records of each partner's basis or capital accounts. Last year's K1s had losses that carried to each partner's personal return, whether they had the basis or not; who knows?
Also add to the frustration that the client tells me she incorporated in Feb 2005 and elected to be taxed as a S corp. It appears that the 2553 was never filed, much to her surprise. She tells me that she bought out her 50% partner and friend, but only after they incorporated.
What to do? Should I go ahead and file the 1065, now late, with income and expenses from Jan to Feb? Then file the 2553 with a late file exception, wait until it is approved and then file the 1120S? Or should I file the 1120 and file for a late 2553 for 2006?
I'm all confused.
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