Partner Withdrawl from LLC
The situation is that I and
another partner started an LLC. When we filed for incorporation, both of our
social numbers are in the incorporation papers. We both own the
company. However, we never got around to write up and operating
agreement saying who should get how much of the profits. Right now, my
partner is not doing a good job and willingly he agreed to withdraw. I
went online and read that some states let members to withdraw and some
don't. And if they do, they have to write up a letter saying that they
want to withdraw and that takes effect like 30 days after the letter
is submitted. So I would like to know what I should do. Do I ask him
to write a letter? My company is incorporated in NewJersey and is
operating under NJ. Can you tell me what is my next step is and
what forms I need to fill out and where to file them? Thanks.
Re: Partner Withdrawl from LLC
This is not necessarily difficult, but you might need an attorney's help, one who is familiar with these matters. Not having seen the document used for the formation of the entity, I am a little confused as to what was actually done - an actual incorporation, the formation of a LLC and/or the formation of a LLC, but election to be taxed like a corporation? Were shares issued, or membership certificates issued? If some certificate representing ownership has been issued, it can be merely signed over to you, along with a simple letter stating that your "partner" resigns from the entity, turns over all of his interest to you, and that this be effective immediately. The letter is dated, signed and his signature witnessed (by anyone but you). There is no need to wait 30 days for this to be effective. More important is what the registration elections, if any, were made with IRS when you filed for a TIN, which may need to be updated and corrected to show the current status (you as the sole owner). NJ recognizes 1 person LLCs and for income tax reporting purposes (Federal and State) you do not have file a separate return for the LLC, but can simply report its profit or loss on Schedule "C" of your personal return. However, for 2007, since, at least for part of the year, if not the whole year, there were 2 members, either Form 1065 (Partnetship return) or Form 1120 (corporate return) may need to be filed. I suggest everything become effective as of January 1, 2008 to keep things clean, unless your "partner" agrees to withdraw from the inception of the entity formation. If you need more information, contact me directly. This is a response to an Internet question and the reply is not intended to be legal advice or as creating an attorney-client relationship.
Re: Partner Withdrawl from LLC
This is not necessarily difficult, but you might need an attorney's help, one who is familiar with these matters. Not having seen the document used for the formation of the entity, I am a little confused as to what was actually done - an actual incorporation, the formation of a LLC and/or the formation of a LLC, but election to be taxed like a corporation? Were shares issued, or membership certificates issued? If some certificate representing ownership has been issued, it can be merely signed over to you, along with a simple letter stating that your "partner" resigns from the entity, turns over all of his interest to you, and that this be effective immediately. The letter is dated, signed and his signature witnessed (by anyone but you). There is no need to wait 30 days for this to be effective. More important is what the registration elections, if any, were made with IRS when you filed for a TIN, which may need to be updated and corrected to show the current status (you as the sole owner). NJ recognizes 1 person LLCs and for income tax reporting purposes (Federal and State) you do not have file a separate return for the LLC, but can simply report its profit or loss on Schedule "C" of your personal return. However, for 2007, since, at least for part of the year, if not the whole year, there were 2 members, either Form 1065 (Partnetship return) or Form 1120 (corporate return) may need to be filed. I suggest everything become effective as of January 1, 2008 to keep things clean, unless your "partner" agrees to withdraw from the inception of the entity formation. If you need more information, contact me directly. This is a response to an Internet question and the reply is not intended to be legal advice or as creating an attorney-client relationship.
