Shifting from Multi-member LLC to Single-Member LLC

[kschuck]

I am shifting from a partnership (Multi-Member LLC) to a Single-Member LLC. I know I need to file form 8832 to change the filing status. However, I have some concerns over the timing. 

The change was made effective 01/01/2021, but I did not send the form yet. I have just filled it out and am getting ready to mail it.

Will it be processed in time to not cause trouble with my 2021 tax return since they're expecting a form 1065 by March 15th?

Do I just mail it certified and file with my personal taxes and not worry about it, or do I need to do something extra to notify of the change?

[ThomasM125]

It would be best to file a final form 1065 if you didn't do that on your 2020 form 1065. Check the box in G(2) to designate it as being final. Just leave the rest of the return blank. That is all you need to do to inform the IRS that the partnership is over. You will need to include K-1 schedules with the partners information, just no numbers entered.

[kschuck]

Hey Thomas, 

Thanks for the reply. I just want to confirm that filling a final blank 1065 for 2021 doesn't change anything with the company. Everything else such as FEIN, etc. will remain the same, and I will just begin filing the business activities on a Schedule C with my personal return. Is this correct?

[ThomasM125]

@kschuck That is correct, you just use the federal ID number on your schedule C Going forward.

[Rick19744 · Accepted solution]

I believe we need to expand on the scope of the question:

• Changing the entity structure from a multi-member LLC to a single member LLC is handled in accordance with Revenue Ruling 99-6.
• There are a lot of moving parts when this happens, so I would recommend you review this revenue ruling and make sure you are handling everything correctly.
• Additionally, the EIN of the multi-member LLC was assigned to the entity.  You do not use this EIN going forward.  You either need to use your SS# on the Schedule C or get a new EIN.  You are not required to obtain an EIN for a single member LLC unless you have employees (payroll).
• There are millions of unprocessed tax return related to 2020.  There are amended returns that have not been processed by the IRS.  There are 2021 returns being filed.  Just make sure you send the return certified mail return receipt requested.  
• As noted, your form 1065 is late.  You will most likely receive a late filing penalty.  You should be able to get this waived, but you would need to request the abatement of penalties in a letter.  No guarantee.  And since there are millions of unprocessed tax returns, you may continue to receive late filing letters as your response letter will sit somewhere for a while.