LLC partnership with only one partner?

[JenMO]

Client had been running LLC ptnshp with 1% partners. For 2015, just getting ready to file, he tells me he has no partners. He wants to keep LLC, because in 2016, he plans to work the LLC with partners. How do I file 2015?

[kathyc2]

Client had been running LLC ptnshp with 1% partners. For 2015, just getting ready to file, he tells me he has no partners. He wants to keep LLC, because in 2016, he plans to work the LLC with partners. How do I file 2015?

Obviously, a one person LLC is not a partnership. Does he have documentation as to how and when the partners from 2014 return were removed in 2015? Since we are quite a way into 2016, does he have documentation as to when in 2016 he added partners?

[TaxGuyBill]

It can still remain an LLC, but it goes on Schedule C.

When the last partner was removed (other than your client), the Partnership ended. It can still remain a LLC. Unless that happened on December 31st (or the last day of a Fiscal Year), a "short year" Partnership return should have been filed. From that date until a new Partner is added, the business goes on Schedule C (as an LLC "disregarded entity").

[Nashville]

Salvage the 1065

From that date until a new Partner is added,.

If a new partner is added before the year closes, I would rescue the partnership from having to close down into a proprietorship and crank up a brand new partnership with a new FEIN #.

Purists would disagree with me, TaxGuyBill, but this is a practical matter. In fact, I don't know anyone in the IRS who would wish for the Service to endure all the hoops to jump through.

If a new partner is not added by the end of the reporting period, I agree. The LLC continues, but is doomed to report as a proprietorship.

[JenMO]

I really believe the ptnshp ended the last day of 2014, but we did not file as final. The partnership only consisted of three guys working construction together. There were no assets purchased by the ptnshp, just a splitting of the income and expenses. My client was the major partner and the other two were very small % partners. The three did not work together in 2015, and so far not in 2016. Do I file a final partnership return for 2015? My client continued to work as an LLC and i have put his income and expenses on a Sch C for 2015 using the LLC name and EIN.
Could I possibly file an amended partnership return for 2014 and mark final? If I do a short year, are we going to be penalized for not filing soon enough?
If he gets his partnership back together in 2016 or 2017 with 1 or 2 different partners, do we need to get another EIN?

[JenMO]

Can i file the partnership with no income or expenses for 2015, thus saving the partnership/LLC for 2016? I'm not sure the partnership was actually dissolved or they just quit working together for 2015?

[TaxGuyBill]

If your client continued to work within the LLC, I think you need to amend the 2014 return to mark it as Final.

If can't really file a full-year 2015 Partnership return with the LLC name and EIN if the name and EIN is already being used on Schedule C. Filing a Short Year would result in penalties, so I would avoid that. So amending 2014 as Final makes most sense to me, and that is the date that you seem to think any real 'partnership' ended.

[JON]

Maybe Partnership is not over?

Perhaps this is a joint venture for certain types of construction jobs which are bid on, worked on and completed by all three. Joint ventures reporting are correct to be filed as partnerships.. I do not think there is any demanding reason to show anything as final, unless there was a liquidation that was not recorded on the return.??

[TaxGuyBill]

Jon does make a good point, but the problem is the the client used the LLC name and EIN and claimed 100% of it on Schedule C. Using the EIN on both a full-year Partnership return and a Schedule C is problematic.


On the other hand, now that I think about it, the fact that it is an LLC means it is registered with the State. How many members are legally part of the LLC? If the other two people are still legal members of the LLC, maybe a Partnership return does need to be filed. In that case, I would think that 100% of the profit should be allocated to the working-partner as a Guaranteed Payment (assuming that doesn't conflict with the Partnership Agreement), otherwise the non-working partners would receive part of the profit. Then the Schedule C should be eliminated.

[JenMO]

Not sure when client worked if actually under the Llc name and number. Haven't done his return yet either. He did some construction work, but I didn't see any 1099s. Hate to dissolve the Llc partnership

[Burke]

Sounds like you need a thorough conversation with the client to clarify these issues. Several valid points have been raised. Make a list of questions.