Schedule K1 / Schedule C

[Judoka26]

Background - I am invested in 2 partnerships.  The first is Millennium USA Hedgefocus Fund LP and I, as an individual, is listed as the limited partner.  I receive a schedule K1 and use that information to file my taxes.  The other partnership is with an LLC, that is involved in hotel projects that construct and commence initial commercial operation of the hotel.  Rather than list I, as an individual, as a limited partner, I created an LLC that is listed as the limited partner in this investment.  I receive a schedule K1, but because the my partnership is listed as an LLC, I file this as Schedule C, a business.  I am the sole proprietor of this LLC and it was formed as a way to help shield my personal wealth from any unforeseen issues that might arise from building and initially running this hotel.  I do not consider my LLC to be a business per se, I consider it strictly as an investment.     

Two Questions: 1) since I am the sole proprietor of this LLC, and have no expenses, etc, can I just file this as a personal K1, or must I, because I created an LLC always file this as a business. 2) If the answer to question #1 is yes, I must file this as a business; then if I change my partner information from an LLC to me as an individual, could I then file this, not as a business using schedule C, but just as an individual ?

[EleanoreS]

Your LLC is considered to be a disregarded entity for tax purposes unless you have elected to be treated as a subchapter S corporation.  If your LLC is a disregarded entity, you would enter the Schedule K-1 on Schedule E.

Note that K-1s issued to a LLC that is a disregarded entity should have box H2 checked stating that the interest is owned through a disregarded entity (DE) and the partners name and social security number should be entered.

Here is a link to a TurboTax video on how to enter a Schedule K-1.

Thank you for joining us at the Ask the Expert event today!