Partnership lnow only has 1 partner

[JPROSBALLC]

Partnership A was owned by 2 partnerships(B & C) until the end of 2023. Partnership B purchased Partnerhip C's share. The CPA filed 1065 for Partnership A in 2023. Partnership A planned to bring on another owner in 2024 - keeping the partnership alive. The owners of Partnership B were paid as employees in 2024. There was no new owner added. Partnership A is now considered a disregarded entity and all 2024 activity is reported on B's 1065.
Does this mean all the payroll for the Partnership B's owners needs to be 'undone'? And until they find another owner, they do not receive wages, but guarantee payments instead?
I do understand a letter to IRS requesting Partnership A's entity type changed from Partnership to Single Member LLC (right?).

Does this make sense?

Thank you in advance!
Denise

[kathyc2]

No, it really doesn't make sense. I'm wondering if you mean partners instead of partnership in some of the companies. It would help if you put fake names as to who the partners are in each to help people understand the overlap of partners between the businesses.

[Lion]

Partnerships do NOT pay wages to partners. Disregarded entities do NOT pay wages to owners.

[JPROSBALLC]

Poppy is a Partnership in 2023 with owners, William LLC (partnerhip) and Jones LLC (partnership). Williams buys out Jones on 12/29/23. The partners of William LLC work for Poppy and received W2 wages in 2023.
In 2024 Poppy spends the entire year negoiating with a 'replacement' for Jones' shares. This does not happen. The partners of William LLC received payroll from Poppy for 2024. I understand for 2024 Poppy is now a Disregarded Entity of William LLC.
Does this mean, the W2 wages need to be 'undone' and replaced with guarantee payments. (Amending all 941s, W2, etc)
For 2025, until Poppy acquires another partner, the partners of William LLC who work at Poppy, are to receive guarantee payments and not W2 wages. If Poppy is successful in obtaining a new partner, then those partners can be back on payroll.

Comments?

[kathyc2]

There are constructive ownership rules for partnerships with this much overlap of ownership. I've never had a need to learn the details, but with what you described, you probably should.

As far as the payroll, I'd leave it as is for 2024. It's certainly not the first time a partnership paid payroll to partners. A lot of paperwork, delays, and potential for errors for something that's essentially going to have the same end numbers.