My two-member LLC has become a one-member LLC due to the
withdrawal of one member.
My questions are:
Do I need to file any forms to alert the IRS or state that
the LLC will no longer be filing as a partnership, but via
self-employment?
We do not have a "clent:CPA" relationship and this response
should only be considered as you consult whomever is your
professioanl advisor. The answers below are for
entertainment purposes only. This is an exhibition, not a
competition. Please, no wagering.
The LLC "techincally terminated" *as a partnership* (it
still exists as an LLC) on the date the other member
withdrew. You "inform the IRS" by filing a "short period"
(aka "stub period") Form 1065 for the period starting on the
first day of the LLC's tax year (usually 01/01/YYYY) and
ending on the date of the other member's withdrawal. (There
is a box near the top of the form that you will "X"
indicating it is a final return.) Each of the two K-1s will
also be "X"d final.
The NY state return also has a box to mark as final. If I
recall correctly, NY does not have it's own K-1s, but rather
a lit of the partners and then you attache the federal K-1s.
(It's been a long time, so I may be incorrect on this.)
If the LLC also filed NYC and NYM returns, then there will
be similar rules.
Does the LLC need to alert the IRS or state that the member
withdrew?
Not per se, the K-1 marked "final" does the trick. Although
yours will also be marked final, you "inform" the IRS that
you are still a member by including the LLC's income / loss
on your Sch. C. Remember that your Sch. C income / loss
will only be for the period beginning the day after the
other member's withdrawal and ending on the last day of the
LLC's tax year. You, and you alone, will have the full year
of the LLC's income / loss reported on your Form 1040 in two
places: Sch. E will have the portion when there were two
members (and only your percentage) and Sch. C will have the
portion when you were the only member (i.e., 100%)
I've never seen a NY individual return; it may be the same
as the 1040 and it may not.
Does the LLC need to file any form to change into a
"disregarded entity"?
Not for federal purposes; I do not know NYS's rules.
And does "disregarded entity" status take away the "limited"
part of LLC liability?
This is a legal question. The LLC never gave you limited
liability against your own actions so that part does not
change. I would suspect for other items that it may depend
on how "separate" you keep your personal life from you LLC.
This LLC is formed in NY.
See above for NY answers.
Peter C. Gatto, CPA