My husband and I have an LLC and have been filling schedule C since it was formed in 2007. We added me as a 50% partner in 2010, we kept as filing two schedule C's. We now want to change to 1065 for several reasons, including the ability to show our guaranteed payments as income on our 1040 versus as expenses on schedule C for loan reasons. If you use schedule C, this impacts ability to get a loan since it is looked as an expense by lender even though we pay ourselves generously and have paid ourselves exactly the same way for years using guaranteed payments and keeping business activities and finances 100% separate from personal. I had another partnership LLC where I filed 1065 with a non-spouse and have since dissolved, so I understand how to file 1065 and K1. However, the IRS seems confused on how to treat us since we are husband and wife and previously filed two separate schedule C's. It rejects us because we have been in existence with an EIN because we didn't file 1065 in the past or since forming. When we formed, we were only a single-member LLC. We do not have residency tied to any US state because we have lived 100% outside of the US for 5 years and file in each state we do business in. Do we have to initially paper file even though we've been e-filing under our EIN as a business?
