I was made 50% owner of my husband's pre-existing parternship LLC this year. It wasn't an exchange or a sale because I didn't buy the shares but it was a strategic decision because of my relevant skill set and he was overworked.
We now both receive guaranteed payments.
When filling out our K-1s, do I still tick line J: "Check if decrease is due to sale or exchange of partnership interest" and are there any other items I need to keep in mind?
Thanks!
A partnership/multi-member LLC *must* have at least two members. So if all but one members relinquish their membership in any way, that dissolves the partnership entirely. So both of you will receive a "final" K-1 from the partnership.
Exactly how this gets handled more precisely, depends on what the parnership does and what assets (if any) the partnership has. Things that matter here is stuff like inventory, assets, and vehicle use (if any claimed) inside the partnership.
Some thoughts:
Thanks for your answer, yes the company went from a single-member LLC to a multi-member LLC taxed as a partnership (no one left the company, I just joined).
The partnership uses cash accounting method and is an extremely simple set-up. The only purpose of the LLC is to hold our shares of another partnership (in which we're active partners) and for us in order for us to receive our guaranteed payments.