LLC to Sole Proprietorship

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My husband and I formed a two member LLC a couple years ago. It automatically defaulted to a partnership for tax purposes. I would like to change it to a single member LLC taxed as disregarded entity. How do I do this with the IRS and the state?

 

[Kerry Claxton]

You cannot change to a SMLLC if there is more than one member. Since both your husband and you are both owners you have more than one member. Only way would be to gift or buy out one spouses interest, which results in a technical termination of the partnership as there would no longer be at least 2 partners which is required for a partnership. State law may allow the conversion from MMLLC to SMLLC if not you would have to form new SMLLC. Also regardless of state law would have to apply for new EIN as entity type changed.

Kerry Claxton, CPA