FORM 1065

[Tavo]

I have a client who is the only General Partner of a Partnership and his partner is the Limited Partner, however, since they registered the company 3 years ago,  each of the 2 members have been reporting the income on schedule C and NOT filing 1065. What do I do?

[IRonMaN · Accepted solution]

Looks like there are two different paths to choose from:

1.  Amend the partners' 1040s for the 3 years as well as prepare 1065s for the years.

2.  Start doing things right this year and tell them to both start going to church every Sunday and sit in the front pew and pray that their lottery number doesn't come up at the IRS.

As a side note to aid in path selection, did they have a partnership checkbook and act like a partnership or did they run things like 2 individual businesses?

[Tavo]

They own a Granite installation business and both work, so they haven't been running things like a partnership, and no, they don't have a partnership checkbook..As far as I can see they've been receiving one 1099, they then divide it in half and each go about their way.

I don't know why they registered as LP..

(LOL re: the church thing) 🙂

Thanks so much for your fast response, by the way.

[IRonMaN]

You betcha!

By the way, does the 1099 come in one of their names or is it the name and ID# of the partnership?

[Tavo]

The 1099 comes in under the EIN # of the limited partner, who is registered as an LLC with the IRS....not under the partnership's. He then  makes a 1099 for the other person and they each do their own business taxes. 

Thanks again for your help!

[sjrcpa]

"EIN # of the limited partner, who is registered as an LLC with the IRS." 

How does an individual register  as an LLC with the IRS?

Did this person form a SMLLC?

"client who is the only General Partner of a Partnership and his partner is the Limited Partner, however, since they registered the company 3 years ago," Registered where? As in set up a General Partnership with the state corporation/entity division?

I am confused.

[Tavo]

Thank you for your help! I think I figured this out. It boils down to this: an LLC with only one member is treated as a sole proprietor for tax purposes, so in essence, the income (1099) has been reported to the EIN of one of them who then makes a 1099 for the other person and they each have been doing their tax preparation as sole proprietors, each preparing a schedule C. 

For some reason they registered with the secretary of state as an Limited Partnership, but they really are not a Limited Partnership since the limited member has been working just as the general member....

Thank you for all your help.

[George4Tacks]

What is the state filing requirement for a Limited Partnership? Are there late filing or non filing penalties to contend with.
Maybe they need to go to church twice a week.