gfizer Posted February 1, 2021 Report Share Posted February 1, 2021 I have a client who has for many years been a general partnership with two partners filing a Form 1065 for rental real estate activity. This year, without consulting me, they decided to form a limited liability company and filed all the appropriate paperwork with the Kentucky Secretary of State. The entity is still be taxed as a partnership so technically nothing changed from a tax perspective except the name which went from "BW Associates" to "B&W, LLC." As I understand it, I would simply have needed to check the "name change" box on the 2020 return and continue on my merry way. Problem is, however, that they applied for and received a new Federal ID number for the LLC. Because of this, do I need to file a part year return for BW Associates and a part year return for B&W LLC, or can I continue using the old EIN and try to explain to the IRS should they ever question why a return was never filed under the new number issued to the LLC? To further complicate matters, they never completed the registration process with the state of Kentucky and as a result have no ID number for filing the state return for the LLC. Why do people do things without asking questions first?!? Ugh. 2 Quote Link to comment Share on other sites More sharing options...
Margaret CPA in OH Posted February 1, 2021 Report Share Posted February 1, 2021 On top of all those unpleasantries for you, isn't there an additional KY filing requirement and fees (of course) for LLC's? I used to have a dog trainer that was an LLC and she was surprised about the additional filing. I don't know if p'ships are different. With all her activities in so many taxing jurisdictions in KY and OH, I finally 'invited' her to find another preparer more familiar with KY. She was really nice but I could never charge enough to cover all the time on her taxes. Make sure you charge enough to cover all the time you will need to address this mess. Clients need to understand the consequences of their actions. We keep trying to drill into them to ask first but it doesn't always sink in. 3 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 1, 2021 Report Share Posted February 1, 2021 The key question is did they legally move and retitle the assets? The answer to this question will determine what you do If not, then the LLC is just a shell with nothing in it. Quote Link to comment Share on other sites More sharing options...
JoeFreitag Posted February 1, 2021 Report Share Posted February 1, 2021 This is what I was typing before notified you'd done it. Getting an EIN and not transferring accounts or activity under the EIN is meaningless. If they did transfer the activity to the new EIN, you have a new entity IMO. There was a transfer of assets that changed the liability. Just now, cbslee said: The key question is did they legally move and retitle the assets? The answer to this question will determine what you do If not, then the LLC is just a shell with nothing in it. Quote Link to comment Share on other sites More sharing options...
gfizer Posted February 1, 2021 Author Report Share Posted February 1, 2021 57 minutes ago, cbslee said: The key question is did they legally move and retitle the assets? The answer to this question will determine what you do If not, then the LLC is just a shell with nothing in it. They changed the name and ein number on all bank accounts and loans and deeded the real estate to the LLC. Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 1, 2021 Report Share Posted February 1, 2021 On a positive note, you get to bill them for two part-year returns, which should end up being about 3x your normal bill. If you're using ATX, you'll want to do a short year rollover in the 2020 software, after you've done the old partnership final short year. You do this on the month/quarter tab of the 2020 rollover screen. This will rollover all of your assets with the proper beginning accumulated depreciation, and it will calculate the correct short year depreciation for the new LLC's first short year. Make sure you enter fiscal year dates in the old 1065. Now here's where you get to be a hero. There will be late filing fees for the old 1065, but you can get them automatically removed either under first time forgiveness or by using this: Partnership Late Filing Penalty Relief Please remove the penalty for late filing of a partnership return under Rev. Proc. 84-35 and code section 6698(a). The partnership is a domestic partnership with 10 or fewer partners, each partner is a natural person or an estate, each partner’s share of each partnership item is the same as such partner’s share of every other item, the partnership has not elected to be subject to the consolidated audit procedures under IRC 6221 through IRC 6233, and all partners reported their share of all pass through items on timely filed individual returns. 3 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 2, 2021 Report Share Posted February 2, 2021 Did they also execute the necessary partnership legal documents and LLC Documents to do the same. You can't just retitle things without these documents. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 2, 2021 Report Share Posted February 2, 2021 Did they dissolve the partnership? You can check the secretary of state's website to see if the partnership still exists or the date it was dissolved. Quote Link to comment Share on other sites More sharing options...
gfizer Posted February 2, 2021 Author Report Share Posted February 2, 2021 10 hours ago, Lion EA said: Did they dissolve the partnership? You can check the secretary of state's website to see if the partnership still exists or the date it was dissolved. 14 hours ago, cbslee said: Did they also execute the necessary partnership legal documents and LLC Documents to do the same. You can't just retitle things without these documents. Partnerships are not required to be registered with the secretary of state in Kentucky. But no, they did not. Basically they changed the name and adopted LLC status for liability protection and continued on business as usual. No separate books or anything of that nature. They executed everything required to form the LLC but did not do anything to dissolve the partnership. Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 2, 2021 Report Share Posted February 2, 2021 Where I was going with this now that I have time, in my state Partnerships and LLCs are required to have Operating Agreements which spell out what needs to be when depending on changes in the organization which would include dissolution, formation etc. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 2, 2021 Report Share Posted February 2, 2021 KY does have forms for dissolving partnerships: https://www.sos.ky.gov/bus/business-filings/Forms/Pages/default.aspx Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted February 2, 2021 Report Share Posted February 2, 2021 6 hours ago, cbslee said: my state Partnerships and LLCs are required to have Operating Agreements In Oregon? I don't think so, although a good idea to have one. Quote Link to comment Share on other sites More sharing options...
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