I see some incorrect information in this thread and will take the time to correct it here.
Mid-year I switched from a sole proprietorship to an LLC-partnership w/ me and my spouse.
One post states "there is essentially no difference". The fact is, there is a big difference when going from a single owner business that is either a sole proprietorship or single member LLC, to either a Partnership or Multi-member LLC.
Your sole proprietorship is considered a disregarded entity by the IRS and as you know, gets reported on SCH C as a part of your personal 1040 tax return. (Doesn't matter if you're filing joint either.)
Whereas your Partnership or Multi-Member LLC has to file it's own physically separate tax return on IRS Form 1065. The Partnership will then issue each partner their own individual K-1 which each partner must enter into their personal 1040 tax return. It also doesn't matter if the two partners are married and will be filing joint. That just means you'll be entering a K-1 for you and a K-1 for your spouse on your joint personal 1040 tax return.
So as to save time for informing you of how to do this, I need to know a few things so I don't waste your time covering items that just don't apply to you and that may just add to the confusion.
- Does the sole proprietorship have any business assets that need to be transferred to the partnership?
- Does the sole proprietorship carry an inventory that needs to be transferred to the partnership?
- Does the sole proprietorship claim *ANY* vehicle use and if so, is that vehicle 100% business use only? Or less than 100% with the percentage of business use varying each year?
- On what "exact" date was the partnership "open for business"?
- On what "exact" date was the sole proprietorship "open for business?"
With the above information I can walk you through doing this correctly. Oh yeah, it also matters in what tax year this occurred. Hopefully not 2018. If it occurred in 2018 then your partnership return is late. The late filing penalty for a partnership return is $200 per month, per partner. So that would mean you've already accumulated $2000 in late filing penalties, and that jumps to $2,400 on Sept 16, 2019.
