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taniacubberly
Level 1

Where do I change my sole proprietor to partnership on turbo

 
2 Replies
ColeenD3
Expert Alumni

Where do I change my sole proprietor to partnership on turbo

If you have either Self-Employed or Home and Business, you can't. These are programs on which you can file a Schedule C. If you have a Partnership, you need the Business program.

 

Business program. Please click here to order it.

Carl
Level 15

Where do I change my sole proprietor to partnership on turbo

On the tax front, you don't "change" from one business type to another. You have to permanently close the old business, and open a completely new business. This "IS" tricky if you don't know what you're doing.

First, you have to close your SCH C business. To do that you mus show the disposition of all business assets (if any), the disposition of all inventory if the business caries an inventory, and the disposition of any and all vehicle use, even if that vehicle use is less than 100% business use.

Basically, if you plan to transfer all assets and/or inventory to the partnership, then for the final SCH C you will indicate that you removed those assets/inventory from the business "for personal use".

Note that you "MUST" show the disposition of all business assets and every penny of inventory (as well as vehicle use) the business had in it's possession on Jan 1 of the tax year. If you do not do this, then as far as the IRS is concerned your business is not closed.

Next, you will need to complete and file your first 1065 Partnership Return. For that you will need TurboTax Business (different from Home & Business). Once you complete the 1065 return and issue a K-1 to each partner, you can then use your K-1 to complete your personal 1040 tax return.

Take special note of the following:

1) Do ***NOT*** file ***ANY*** tax return until ***AFTER*** you have completed ***ALL*** tax returns and are 100% satisfied with the results.

2) The 1065 Partnership return is due to the IRS by March 15th. (unlike your personal 1040 return that's due Apr 15). If you are late, then the late filing penalty for the 1065 partnership return is $200 per month, per member. So if you file the 1065 on march 16th and there's only two members in the partnership, your late filing penalty is $400. The moral I'm trying to stress here is ***DON'T*** ***FILE*** ***LATE***.

Now get started on all this early becuase I can guarantee you with 100% certainty that you will have questions when you get to the 1065 return. Lots of questions. We're happy to answer them too. But if you wait to the last minute don't be surprised if answers don't come as fast as you would like.

 

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