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Does IRS needs to be notified or EIN updated after member of LLC leaves in a partnership?

Posted by Giselle Ayala Mateus | Jul 09, 2020 | 0 Comments

By Giselle Ayala Mateus

First, a partnership exists when two or more people carry a business together as co-owners. This is, they share expenses and profit. To be in a partnership you don't need any formal act, a partnership can be derived from the conduct of the partners. Being that said, partners don't create a legal entity different to them, so they file their taxes as individuals. For more information about the tax implications of being involved in a partnership, you need to consult your tax attorney or an experienced accountant.

Second, an LLC is a legal entity independent of its members. An LLC can be managed by its members or by managers. LLCs can choose to be tax as a corporation or as a partnership. If the LLC is being taxed as a corporation the LLC does not have to inform the IRS of the specifics of who owns equity in the LLC. This is speaking in general terms. If the LLC is being taxed as a partnership the situation is different because there is no dual taxation and the partners pay taxes on the income they received from the LLC.

This is what you need to have clear when thinking of the tax consequences of being on partnership or an LLC. From here, you should probably contact your tax attorney or your accountant.

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About the Author

Giselle Ayala Mateus

Giselle Ayala Mateus is a NY attorney with comprehensive experience in transactional law, creative agreements, business formation, and immigration law. She is also the founder of FOCUS a not-for-profit project focused on supporting entrepreneurs and artists.

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