Single Member LLC to Multimember LLC

[vshah20]

My wife operated her business as a single member llc. In June 2022, she added me as a member of the llc and converted it to multimember llc. We changed the status at the NJ state level and also filed form 8832. We got confirmation from state as well as IRS confirming the change. I know that we will have to file Schedule C for the period Jan. 2022 to May 2022 and Form 1065 from May 2022 to Dec. 2022. Below is the question I have:

1) When preparing the Schedule C form in Turbotax Home and Business, there is no option to choose the end date of single member llc i.e. May 31st 2022. How do make sure that operating date for the single member LLC is correctly reported. I am worried that my individual return may get rejected because of 2 two different filings (Schedule C and 1065) of the same LLC

[tagteam]

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@vshah20 wrote:

I am worried that my individual return may get rejected because of 2 two different filings (Schedule C and 1065) of the same LLC

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Did your wife have an EIN for her LLC? If so, did you get a new EIN?

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

If your wife never got an EIN for her LLC, you will need one for your multi-member LLC.

[AliciaP1]

You can mark the Schedule C  as ended in 2022 within the business General Information section.  The end date is not necessary for the single-member LLC, just ensure the start date of the partnership is accurately reported on the Form 1065 and in future ones.  Also, be sure you complete the Form 1065 before you do your personal return, as you will need the Schedule K-1 forms from the partnership in order to complete your personal return.

To mark the single-member LLC as ended in TurboTax Online you can follow these steps:

1. Using the magnifying glass near the top right of the page search for Schedule C
2. Use the Jump to link that shows in the results
3. Click Edit for your line of work you need to mark ended
4. Click Edit for the General Info line
5. You can see Stopped work in 2022 near the middle of the screen, click Edit below 
6. Mark the box for I stopped XXX in 2022 and Continue
7. On the Tell us if any of these situations apply screen, mark the box None of these apply

@vshah20

[vshah20]

The single member LLC had and EIN. We are using the same EIN for them multi-member LLC as well

[vshah20]

Hi @AliciaP1 

Thank you  so much for the feedback. It was great relief to get that solution.

Will the feature to edit be available on the desktop Turbotax version as well? I am using the Desktop Home/Business Edition and not the online version. 

Would I need to file any other forms like Form 8564 along with the Schedule C?

[ThomasM125]

I'm not sure if using the same EIN number in two places on your tax return will present a problem. However, if you didn't receive any 1099 forms reporting income using the EIN number, you could leave it off the schedule C. Many sole proprietors don't have an EIN, so it is common practice not to have one listed on the schedule C. If you have income reported on a Form 1099-NEC then you might need to enter the EIN on the Schedule C as the IRS will want to match the income to the tax return.

[AliciaP1 · Accepted solution]

Yes, you can edit your business info in TurboTax Home & Business as well.  I'm not sure what Form you mean to attach to your Schedule C - there is no federal Form 8564.

To edit your business info in TurboTax Home & Business you can follow these steps:

1. Within your tax return under the Business tab click Continue and I'll choose what I work on
2. Click Update for Business Income and Expenses
3. Click Edit for the business you need to update
4. Click Update for the Business Profile
5. Click Edit for the Disposed of Business in Current Year
6. Mark the box for I sold (or disposed) of my business in 2022
7. Mark No for Did you dispose of the business in either of the following ways?

@vshah20

[tagteam]

@vshah20:

The single member LLC had an EIN. We are using the same EIN for them multi-member LLC as well

You need a new EIN for the multi-member LLC. Refer to the link in my previous post.

When your wife received an EIN for her single-member LLC, it was no different than if she had received an EIN for a sole proprietorship.

The IRS does not, by default, recognize single-member LLCs as distinct and different from sole proprietorships. The default classification for the new multi-member LLC is a partnership for which the LLC will need a new EIN.

[tagteam]

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@vshah20 wrote:

Would I need to file any other forms like Form 8564 along with the Schedule C?

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I am virtually certain you mean Form 8594 and you do not need to prepare that form since you are both contributing assets to the multi-member LLC in exchange for interests in that LLC; you are not selling the business.

[vshah20]

@AliciaP1  Thank again for all you help. I was able to update the info as per your guidance.

Sorry for the typo. I meant Form 8594. Based on @tagteam 's response, I believe I wont be required to file that form. 

[vshah20]

@tagteam Yes that is correct. Form 8594. Thank you so much for your inputs!! 

[tagteam]

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@vshah20 wrote:

@tagteam Yes that is correct. Form 8594. Thank you so much for your inputs!! 

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You are most welcome, @vshah20. However, are you aware that you need a new EIN now?