Catalyst V

Other tax discussions

Here's how this works.

First the partnership is dissolved. Then one that is done in it's entirety, you will be starting your own "new" business as a sole proprietor or single member LLC. For now, your only concern is dissolving the partnership and nothing else. Period.

To dissolve the partnership any and all assets must be disposed of in one way or another, and any cash assets must also be disposed of. Additionally, any and all debt of the partnership must be satisfied in it's entirety.

First, all the bills are paid, and if you have any recurring expenses such as rent for a storefront, notice is given as appropriate. Any early termination fees are also paid. All this stuff is paid by the partnership.

Next, all the inventory and assets if any, has to be disposed of. You just distribute this to each partner with the split based on their percentage of ownership. If done right, the distributions would basically be a return of capital investment of each partner, thus incurring no tax liability on the personal tax return of each partner.

Make sure the K-1 issued to each partner has the "FINAL" box checked to indicate it will be the last K-1 issued to that partner (including you) by the partnership.

When dealing with this you work with actual costs, and not retail value.

If there are any vehicles owned by the partnership then disposition of that vehicle by the partnership has to be accounted for too. But I suspect you don't have this situation so won't go into it. So this will take care of dissolving the partnership.

Are you with me thus far?