MMLLC to SMLLC with MMLLC as sole member

[BHoffman]

Client is a MMLLC taxed as a partnership (MMLLCP).  One member is an individual, the other member is a MMLLC (MMLLCM).  The MMLLC partner is going to buy out the individual.  After the buy out, do I report the results of operations of MMLLCP on MMLLCM's form 1065?  How?  

[jklcpa]

Excerpt below from the linked IRS page should help.  It indicates that after the buyout, the owner is the partnership that would report it directly on its return.
https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies

Quote

 

Owner of Single-Member LLC

If a single-member LLC does not elect to be treated as a corporation, the LLC is a "disregarded entity," and the LLC's activities should be reflected on its owner's federal tax return. If the owner is an individual, the activities of the LLC will generally be reflected on:

• Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship) (PDF)
• Form 1040 Schedule E, Supplemental Income or Loss (PDF)
• Form 1040 Schedule F, Profit or Loss from Farming (PDF)

An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.

If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership.

 

 

[BHoffman]

Great info!  Thanks, Judy

[acidburnz]

What about retaining the EIN. 

LLC with 3 members filing a 1065. The other two members just take distributions to zero out their capital accounts and only one partner remains. 

In this case we will file a final 1065 and zero out the schedule L and distribute everything to the members.

The remaining member can then continue to use the same EIN and report the activity on his sch -C?

Thanks

[Lee B]

Once the last 1065 is filed the PTS Entity ceases to exist. Since EINs are not transferable, the disregarded Enitity will need to obtain a new EIN.

"The IRS cannot cancel your EIN. Once an EIN has been assigned to a business entity, it becomes the permanent Federal taxpayer identification number for that entity. Regardless of whether the EIN is ever used to file Federal tax returns, the EIN is never reused or reassigned to another business entity. The EIN will still belong to the business entity and can be used at a later date, should the need arise.

If you receive an EIN but later determine you do not need the number (the new business never started up, for example), the IRS can close your business account.

To close your business account, send us a letter that includes the complete legal name of the entity, the EIN, the business address and the reason you wish to close your account. If you have a copy of the EIN Assignment Notice that was issued when your EIN was assigned, include that when you write to us at:

Internal Revenue Service
Cincinnati, Ohio 4599"