I started my business as an LLC Partnership in MI and have been filing form 1065. My partner is buying me out as of 12/31/2019 midnight.
That means if there's only one owner left, then the partnership dissolves permanently and forever. So for the 2020 partnership return, a final 1065 will be filed and both partners will be issued a final K-1.
The payment end of the sale will happen in 2020 but he has full ownership control for all of 2020.
For tax reporting purposes, until the closing on the sale actually occurs, you are still a partner. Control in the partnership is irrelevant.
I already submitted the 1065 for 2019 but didn’t indicate that it was a final filing.
That's because the partnership was not dissolved in 2019, since an actual buyout didn't occur in 2019.
Should I amend my 2019 1065 form to indicate that it is the final 1065 for the partnership?
No. Because as far as the IRS is concerned, the partnership still existed on and after 12/31/2019.
If I shouldn’t file an amended return, do I need to file a ‘final’ 1065 for 1/1/2020
I note that you used "buying my out" in present tense, and you did not say "bought me out" which would indicate the transaction had already occurred in 2019. So it's apparent to me the transaction did not occur until after Dec 31, 2019.
and he would file another return for the remaining 364 days of the year?
I would be simplest to file a final 1065 for the 2020 tax year and issue final K-1's then. If you amend the 2019 tax return, then you also have to issued amended K-1's and then both of you would have to amend your 2019 personal returns with the amended K-1 data. Seems like a lot of work for the sole purpose of checking a "final" box. Add the that the fact that amended returns can not be e-filed (the IRS says so) and with all this pandemic stuff going on your amended returns may not get processed before your next tax returns are due anyway. This *WILL* create problems for all with e-filing the 2020 return next year. So I suggest you leave 2019 well enough alone and just get it right the first time on the 2020 taxes.
Remember, if you registered your partnership/multi-member LLC with the state, you need to take action to change the status of that partnership with the state from active to inactive. Failure to do so will result in fines and penalties down the road, and it's the designated manager that will pay those fines. It doesn't come out of the non-existent partnership.
