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Hope you are well. I'm running this by a CPA, but also

Good Morning Richard,Hope you are...
Good Morning Richard,Hope you are well.I'm running this by a CPA, but also wanted the legal perspective.I have/had a group of several clients who used to be partners with each other in two LLC businesses.The second of the two businesses failed and closed in 2016, although it has not been fully unwound and dissolved yet. This is partially because there is pending litigation between two of the partners over the business. And partially because the closed business still owes the CPA some money, and has no money to pay, bank account closed. So, not much is happening, understandably.The first, original business, still existing, is now owned 100% by one of the partners, as all the other former partners were legally and contractually bought out in 2016. Once 2016 taxes are complete, K1's issued, etc., this will move forward as a 1-owner business. No problem.But for the failed business, not unwound, in limbo, litigation, accusations, etc., I don't think anyone should do anything, until the litigation is resolved (which it will be soon). At some point, I imagine all the former partners will need to pool a little money together - perhaps along the line of their former equity percentages - pay the CPA, and legally wind down the failed business, file the 2016 tax return, issue the K1's, etc.1. Do you agree?2. I mean, you can't just close a business, walk away, and not file the taxes, right? Eventually that will become a problem with the IRS at least, correct?3. While the litigation wraps up, should one of the former partners of the failed business file an extension on the tax returns for that business? For an LLC partnership, does that extend the deadline to Sept 15 or Oct 15?4. What is the deadline for this filing? And is it easy to file without an accountant/CPA? You are just asking for more time to file?5. While the failed business awaits wrap-up, can the former partners not really file their personal tax returns either, as they need the K1s? They will all have to extend as well? (For both businesses, all partners were paid on draws, if that matters).6. Any other thoughts/advice?Thank You.
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2/23/2017
Richard
Richard, Attorney
Category: Business Law
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Experience: 32 years of experience practicing law and a businessman.
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1. Do you agree? The LLCs are going to be flow through entities that don't pay taxes; rather, everything flows through to the members on K-1's. So, the members would not have any requirement to contribute money to pay taxes or for any of the other liabilties of the LLC as being a limited liability company, the members' personal assets are protected from liabilities of the LLC.

2. I mean, you can't just close a business, walk away, and not file the taxes, right? Eventually that will become a problem with the IRS at least, correct? If the business failed, there would likely be no taxes, just losses. So it's likely to be to their benefit to file a tax return so the losses can flow through to the members.

3. While the litigation wraps up, should one of the former partners of the failed business file an extension on the tax returns for that business? For an LLC partnership, does that extend the deadline to Sept 15 or Oct 15? The LLC does want to file a final return, so yes, I would file an extension so you don't get hit with a late filing penalty.

4. What is the deadline for this filing? And is it easy to file without an accountant/CPA? You are just asking for more time to file? Yes, you could easily do this on Turbo Tax yourselves. Tax return due dates: https://www.thebalance.com/tax-return-dates-for-business-taxes-397652

5. While the failed business awaits wrap-up, can the former partners not really file their personal tax returns either, as they need the K1s? They will all have to extend as well? (For both businesses, all partners were paid on draws, if that matters). They can file extensions themselves or file their returns and then amend them later.

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Customer reply replied 1 year ago
Good point. A few of the former partners will have significant TY2016 tax obligations attributed to the forgiveness of their negative owner capital accounts in the first (still existing) business, as part of the buyout agreements. So, perhaps losses from the winding down of the second (failed) business will help offset those, partially or fully.And I assume you advice would be not to do anything with the second (failed), currently litigious business, until the legal disputes are resolved? No sense making it any more complicated, or drumming up new accusations of wrongdoing.And now that I think about it, the partner who sued the other partner, also made the failed 2nd company a co-plaintiff with him, in the suit. So that is probably additional reason not to do anything with the failed second business at this time, besides filing the extension. Agreed?Thanks

I agree with your assessment. :)

Richard
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Thanks as always for the rating!!

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