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Level 7
November 24, 2022

Partnership dissolved and became a sole proprietorship: Why can't I include details below? A bug.

  • November 24, 2022
  • 2 replies
  • 19 views
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2 replies

GretaAuthor
Level 7
November 24, 2022

1% partner dropped out. Do I need a new EIN for the resulting sole proprietorship which kept the LLC name? I will now report the LLC on the personal return. I need to transfer depreciation for vehicles, rental properties, equipment etc. This happened halfway thru the year, but can I file a zero 1065 and use 99% of depreciation on the sole proprietorship schedules. Frankly, the partner relinquished his 1% years ago, and we're just now catching up to this fact. Messy history that I finally want to clean up. Appreciate your advice!

Level 15
November 24, 2022

No, the LLC itself does not need a new EIN.

After you file the "final" 1065. the taxpayer *MIGHT* need to call the IRS EIN telephone number to let them know the EIN is still being used for the SMLLC. However, I don't think I would worry about it unless there is a problem.

However, take a step back. Are there employees or excise taxes? If not, the LLC probably doesn't even need an EIN. For purposes of the W-9 and 1099s, they should use the EIN (or SSN) of the individual taxpayer. So the taxpayer may want to get an EIN in their own name (not the name of the LLC).

GretaAuthor
Level 7
November 24, 2022

Additional question re dissolved partnership, now a sole proprietor. The partnership included: an Airbnb business and several rentals. Do I now split into Schedules E and C?

BobKamman
Level 15
November 25, 2022

Partnerships

You will be required to obtain a new EIN if any of the following statements are true.

  • You incorporate.
  • Your partnership is taken over by one of the partners and is operated as a sole proprietorship.
  • You end an old partnership and begin a new one.

https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein

Level 15
November 25, 2022

The EIN belongs to the LLC, not a Partnership.

Limited Liability Companies

You will be required to obtain a new EIN if the following statement is true:

  • A corporation files papers with the state to convert to an LLC and will use the default classification of partnership. (The corporation is treated as if it has liquidated in this case.)

You will not be required to obtain a new EIN if the following statements are true:

  • A corporation files papers with the state to convert to an LLC and will elect via Form 8832 to be taxed as a corporation.
  • The number of members in the LLC changes from more than one member to a single member.
  • The number of members in the LLC changes from a single member to more than one member.
  • A sole proprietor files papers to become a state recognized entity, organizes as an LLC, and will file Form 8832 or Form 2553 to elect to be treated as a disregarded entity or taxed as a corporation or small business corporation.

https://sa.www4.irs.gov/modiein/individual/help/help-toc.jsp

BobKamman
Level 15
November 26, 2022

That is true of an LLC that has elected to be taxed as a corporation (a point that IRS does not make clear), but not of one that is being taxed as a partnership, discussed earlier in the link. Furthermore, the departing partner should insist on having his/her/its name removed from the EIN file, or be willing to accept the anguish resulting from a proposed 100% penalty assessment when the sole proprietor is hit up for unpaid employment taxes.