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How to put in Partners leaving LLC?

Kpeabody
Level 1

For a 1065 return

There are 3 partners that each own a third. (well one of them owns 34% and the other 33%)

On October 31st, one of the partners left the LLC. He received a final payout on 12/31/20 which was equal to 1/3 of the cash on hand. No other payments will be made to this partner. 

The remaining partners will now be 50/50 partners going forward. 

How do I go about putting this into proseries? I did a few things (Ie clicked "final k-1" for the partner in question and adjusted the ownership percentages but I feel like I am missing something.)

 

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qbteachmt
Level 15

"He received a final payout on 12/31/20 which was equal to 1/3 of the cash on hand."

Who guided them on this? Because you describe: He got his share of funds on hand.

That means there is Nothing else of value that would be his? You cannot buy him Out of the partnership with his own Equity (share of funds on hand).

However, the other two partners can buy him out, personally. That would be after taking into consider the Value of his third, of course.

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sjrcpa
Level 15

A partnership can redeem a partner's interest.


ex-AllStar
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qbteachmt
Level 15

"A partnership can redeem a partner's interest."

It isn't clear if they allowed the person to "take their ball and go home" or if they intended to buy them out of their Share of the value, though.

"Here's a third of the money; we're going to ignore that the partnership owns $2m in real estate, and the mortgages are half paid down."

🙂

 

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Kpeabody
Level 1

I'm in the process of digging down further with the partners. But the situation seems to be that all 3 were in agreement regarding this. IE the partner that left wanted to cash out. Which was simple for them since they don't have any assets/real estate/etc. Just whatever was in the bank account. 

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sjrcpa
Level 15

Departing partner's capital account gets reduced to zero. The amount needed to do that increase the other two partners capital accounts.

Did you enter the change in ownership dates? That way K-1 items get allocated according to the prorated ownership period.

Form 8308 is probably needed.

The amount paid to the departed reduces partnership capital.

There's probably more. Partnerships ain't easy.


ex-AllStar