I had a few hundred dollars worth of unreimbursed expenses for my business last year. For 2/3 of the year the business was a partnership (LLC) and for the remainder of the year was a sole proprietorship (still LLC). It's my understanding that the expenses incurred before I bought out my partner can't be included in the 1065, because we did not have an agreement in place for them to be reimbursed. How, though, do I record the unreimbursed expenses after the buyout? As capital contributions, as UREs, or something else?
asked 30 Mar '11, 17:11
They can't be included on the 1065 BUT MAYBE you can take them as Unreimbursed Partner Expenses on your Schedule E, Page 2.
Your expenses AFTER you became a sole proprietorship will likely be treatable as capital contributions.
answered 31 Mar '11, 18:01
Once the entity became a Sigle Member LLC (SMLLC), a disrgarded entity, you would be filing the income, for federal purposes, on Schedule C. State issues will get much more interesting as some states require SMLLC's to still file a business reutrn. Once your partner was bought out, you could make any reasonable changes to your operations that you want to, to include making expenses reimbursable. The situation you find yourself in is one of the uglier by-products of the termination of a partnership and you would do your self a favor if you get professional help, at least to get you through this year.
Keep in mind, that the partnership return would have been due on the 15th day of the fourth month after it's termination, so assuming August 2010 - based on the 2/3's of year above, the partnership return would have been due on December 15th. If it was extended, it would have a final due date of May 15th. Hope this helps, let me know if you need anything else,
answered 04 Apr '11, 03:18