Tax Year Prior to 2020: How do I know if my LLC is a sole proprietorship or a partnership?

[lng22392]

How do I know if my LLC is a sole proprietorship or a partnership? Is this based on how you filed with the secretary of state? Or is it based on your articles of organization? I thought I filed as a sole propietor under the secretary of state but my husband and I act as owners in our articles of organization. My impression was that the IRS doesn't look at your articles of organization, only how you filed at the state level.

[tagteam]

---

@lng22392 wrote:

How do I know if my LLC is a sole proprietorship or a partnership? 

---

Essentially, it is based upon numbers; you cannot have a partnership with only one individual; you need at least two individuals (or one individual and one entity, such as a corporation).

Therefore, if you are the only member of your LLC (i.e., it is a single-member LLC) and you have not made an election to be treated as a corporation for federal income tax purposes, then you are operating as a sole proprietor.

[Irene2805]

How many owners are in the LLC? 

• If it's just you,the LLC is a sole proprietorship. 
• If it's you and other(s), it's a multi-member LLC that must file a partnership return.

[lng22392]

Filing at the secretary of state, my name is the only one on the document. But in our articles of organization, my husband and I own the LLC 50/50. I'm not sure if the IRS looks at our articles of organization though because that is not public information.

[VictorW9]

No. The IRS does not look at your articles or operating agreement. Even your operating agreement isn't filed with the state. However, make sure you keep it in a file along with your other business records.

If you were the proposer when setting up the LLC, it means the business was set up in your name only. Normally, you will go through the process of resigning and bring in the other members into the LLC. If you've never gone through that process and your name is the only one in the LLC registration documents, then you are considered a sole proprietorship. 

[lng22392]

Thank you! What constitutes as registration documents? If that's the articles, we have both of us listed as members. I didn't do any resigning but in our articles it asked for all the members of the organization. Or is it in relation to our EIN?

[john-ct]

From what you describe you have a 2 partner partnership, and a 2 member LLC.  (Just like me and my wife.) 

[VictorW9]

@ Ing22392 It doesn't really matter whether you start filing as a sole proprietorship. As far as the IRS is concerned, you are reporting the business activity and paying any taxes due. In fact, filing as sole proprietorship is not to your benefit which means you are assuming 100% of the entity's tax obligation.

When you ready to include your husband in filing the business, then the tax situation becomes a little complicated as you will introduce him into the partnership by creating his own capital account and report the activity of the business by filing a 1065 return. At that point you will not revert to filing a schedule C back again until one of two things happen 1) You dissolve the business or 2) The partnership ends due to a list of many other reasons.

[NASVA47]

And if it is a sole proprietorship how do i make it a separate entity ? by taxing as an s-corp ?

[VolvoGirl]

If you are a Single Member LLC that is Not an S Corp then it is a disregarded entity and you file it on Schedule C in your personal tax return.   

If you elected to be an S Corp when you set it up you file a separate 1120 S Business tax return for it.  You need Turbo Tax Business for an S Corp.The small business program (TT Business) is for 1120 Corporation, 1120S Corp, 1065 Partnership or 1041 Estate/Trust returns and will not do your personal 1040 return.   It  is a separate program from the Desktop Home & Business program or the Online Self Employed version.

Turbo Tax Business  is not available to do online or on a Mac.  You can buy the Window's version here.  And you can have both TT Business and TT Home & Business (or any personal version) installed on  your computer at the same time.

https://turbotax.intuit.com/small-business-taxes

Desktop Windows System Requirements

https://ttlc.intuit.com/community/system-requirements/help/minimum-system-requirements-for-turbotax-...

[tagteam]

---

@NASVA47 wrote:

And if it is a sole proprietorship how do i make it a separate entity ? by taxing as an s-corp ?

---

You simply cannot elect to have a sole proprietorship treated (taxed) as an S corporation.

What exactly are you trying to accomplish?

[john-ct]

You have to look at the original documents setting up the LLC.  Do they include a partnership agreement? Partnership LLCs have two or more members.  You could also ask who set it up for you.

[Critter-3]

When you got the EIN for the business from the IRS what did you choose as a business entity?  Review the EIN acceptance letter from the IRS ... it will tell you exactly which forms you should be filing and when based on what you told the IRS.