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I started an LLC with me as single member in 2008 so I filed

1040 tax return. Not...
I started an LLC with me as single member in 2008 so I filed 1040 tax return. Not knowing any better, I added my husband as a member only on the NC Secretrary of State website where you file/pay business info yearly. I did not file these changes anywhere else (ex IRS form 8832) basically because I don't know what I'm doing! I haven't filed taxes since because everytime I try I get so confused with all the different forms I stop (K-1, 1065,etc). My question is if I can continue to consider my company a single member LLC or do something to go back and change it back then I can figure out how to do my taxes. Is this possible? I can't afford an accountant to do these things for me. We lost our business in 2012 and all inventory so I also need to know how to end my business officially with the state and IRS. HELP!!!
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Answered in 46 minutes by:
11/10/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane :

Hi, since the LLC is a pass-through either way (single member considered disregarded entity, multi-member taxes as partnership, but still everything flowing through to the personal return hat tax EFFECT is the same either way ... For a single member, you put everything on a schedule C and it flows to the 1040 ... for a multi-member you do a 1065, thenh the K-1 takes the information from that to the individual return, as well

Lane :

so the LLC still never pays any tax .. it' s just that the vehicle for getting this income or loss numbers to the 1040 are different between single member and multi-member

Lane :

Further, since the other member here is your spouse, everything still flowed through the same tax return ... Technicaly, you should probably go back and file 1065s for the appropriate years, bt the IRS might consider this as a DiMinimus issue ... taxes would have been exactly the same ... Self employment taxes as well

Customer:

This part I know, I want to know can I go back to being classified as single member because I just don't understand how to do the K-1. I never filed the change form. Nevermind, I don't think I'm explaining my problem correctly. Everything you've told me is available online.

Lane :

I can alsop help you with the dissolutoin issues

Lane :

You DID file the 8832?

Customer:

no

Lane :

But you added at the state level right?

Customer:

I added his name the second year when I refiled and paid the sec of state

Lane :

Let me see if I can find the form for you, you SHOLD be able to file an article of amendment askingfor a retroactive effective date

Lane :

There are also a couple of other legal issues, in that (depending on NC state law) you may be able to be recognizwed as a single memebr (because you are Husb and Wife anyway)

Lane :

GIve me just aseconf her

Lane :

sorry for the atrocious typing ... be right back

Lane :

Is this a rental business by any chance? ... See this: If the LLC is a rental, you can elect to treat it as a single member LLC. See Rev. Proc. 2002-22, 2002-1 CB 733.

Customer:

It is a restaurant. We leased our property and no longer own any part of the business

Lane :

OK here's anther piece: Sec. 8215 of the "Small Business and Work Opportunity Act of 2007" that was signed 4/25/07 in effect seems to allow disregarded entity treatment of what it refers to as a qualified joint venture which "means any joint venture involving the conduct of a trade or business if (A) the only members of such joint venture are a husband and wife,(B) both spouses materially participate (within the meaning of section 469(h) without regard to paragraph (5) thereof) in such trade or business, and (C) both spouses elect the application of this subsection.” Assuming an LLC is a qualified joint venture, this new law is effective for taxable years beginning after 12/31/2006

Lane :

SO, you have federa; law behind you ... what you may NEED t do isdo an amended election ... then at the state level ask for the amendment to your articles based on inadvertent mistake... hang with me a couple of more minutes

Lane :

How to make the election to be treated as a qualified joint venture


Spouses make the election on a jointly filed Form 1040 (PDF) by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the joint venture, and each spouse filing with the Form 1040 a separate Schedule C (Form 1040),Profit or Loss From Business (Sole Proprietorship) ... so to truly dot the I's and cross the t's here (not sure it's necessary_ you'd ament the retuen for thos years and do nothing more that add a schedule C for the other spouse, with everything split dow the middle See this:

Customer:

I only filed 2008 when it was a single member. I added him in 2009 and haven't filed taxes since

Lane :

Then you really have a non-issue at the federal level ... and on the NC side see this: http://www.northwestregisteredagent.com/north-carolina-llc-amendment.html

Lane :

Can you re-state the initial certificate instead of filing an amendment?


Yes. You would just file Articles of Restatement (Limited Liability Company) with the SOS. The restatement may include a new amendment as long as it has the necessary approval. The filing fee to restate the articles of organization is $10. If the restatement includes a new amendment, the filing fee is $50.

Customer:

so for purposes of doing taxes 2009-2012 I should do two 1040 schedule c's split down the middle or amend at state level and continue as single member?

Lane :

That's it!

Lane :

both, actually

Customer:

but 2008 is done and fine?

Lane :

your state TAX return is simply a product of the federal return ... but to really dot the i's you shouold do that re-stated election with Sec of State so everything matches up

Lane :

Yep

Lane :

that one was what is was (if you will)

Customer:

can I avoid the k-1 1065 by doing it this way and the $85 per person/per month penalties?

Lane :

Yes

Lane :

If you elect as of those years there qould be no k-1s to do

Lane :

"would" be no k-1s to do (as you were a QJV, a disregarded entity, for tax purposes)

Customer:

and one last thing- what do i need to do about the fact that we closed in 2012? do i file anything special with state or fed or both or just leave it alone?

Lane :

You'll have to do a disolution with the state most likely ... let me check the NC laws

Lane :

North Carolina Secretary of State
Corporations Division


Mailing:
PO BOX 29622
Raleigh, NCNNN-NN-NNNN/p>

Physical:
2 South Salisbury Street
Raleigh, NCNNN-NN-NNNN/p>

Phone:(NNN) NNN-NNNNbr/>Fax:(NNN) NNN-NNNN/p>

Customer:

Thank you so much, I know I have a lot to do but you've made it seem not as daunting as before!

Lane :

I'd file the restated election, then give it few months (don't go over another tax year) and do the dissolution

Lane :

You'r very welcome ... I think you have your arms around it now :)

Lane :

A positive rating is thanks enough, that's how I get credit for the work here

Customer:

u got it!

Lane :

Thank you so much !

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now

Thanks gain, Kelly.

Let me know if I can help again!

Lane
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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