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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28090
Experience:  Taxes, Immigration, Labor Relations
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My husband formed 6 limited partnerships of which he was general

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My husband formed 6 limited partnerships of which he was general partner back in the '70's. We live in Texas and they were never registered with the state. My understanding is they did not have to be at that time. There are no real assets left in the partnerships. Federal tax returns form 1065 schedule K have been filed each year. How does he dissolve these partnerships?

Lev :

Hi and welcome to our site!
As long as there is an agreement between partners to dissolve the partnership - it might be relatively simple to dissolve it.
All remaining assets should be sold, disposed or distributed to shareholders.
The final tax return must be filed - on form 1065 - www.irs.gov/pub/irs-pdf/f1065.pdf‎
mark "Final" in the header - and the tax ID assigned to the partnership will not be used anymore.
Correspondingly - the partnership issues final K1's to partners if there are any reportable items - also marking "Final K1" at the top.

Customer:

What if there are no assets?

Lev :

Partners will report the disposition of the partnership interest as the sale transaction. If there is nothing in value distributed - the sale assumed at zero price.

Lev :

If there is no assets - there will be formal dissolution and will not be any distribution of assets.

Lev :

However - by filing the final tax return - we tell the IRS about formal dissolution of the partnership.

Customer:

How do they do a formal dissolution? Is it a written agreement between them that states this partnership is dissolved?

Lev :

You may (but not required) to have a signed partnership dissolution agreement - the document signed by all partners that they agreed to dissolution terms.
But neither of partnership agreements are required in writing. As long as all partners agreed - that is Ok. The issue might come if there is misunderstanding between partners - and one partner later will object dissolution itself or dissolution terms.
So it is advisable to have everything in writing - but not required. Either partner may sign the tax return for the partnership.

Lev :

Here is an example of the dissolution agreement you may use - http://www.legalzoom.com/assets/legalforms/legalzoom%20partnership%20dissolution%20agreement.pdf

Customer:

Is is necessary to have an attorney draft the dissolution or can they do it amongst themselves? Thank you for your assistance

Lev :

Attorney is not required. Again - if all partners are in good relations and you do not expect any disagreements and there is no valuable assets - you perfectly may use the template from the link above and do not need additional legal costs.
However if you expect complications - using attorney might be helpful.

Customer:

Thank you again

Lev :

When you are not comfortable and there are some specific issues between partners and there might be disagreement of dissolution terms - you might want to be very careful and consult with a local attorney.
But considering legal fees - if you may avoid disagreements between partners - I see no reason of that additional overhead.

Lev :

Please be aware that after filing a final tax return - you may not use partnership tax ID anymore - the partnership tax account with the IRS associated with that tax ID would be considered as closed.

Lev :

So if the partnership has for instance bank account under that tax ID - the bank account should be closed as well.

Lev and other Tax Specialists are ready to help you