Can members of an LLC file separately on Schedule C forms?

But what if they split up the business activities completely, like one person handles one type of service and the other handles something else? Couldn't they file separate Schedule Cs then?

Even if you've separated the business activities, if you're operating under the same LLC and sharing overall profits/expenses, it's still considered a partnership. The IRS looks at the economic arrangement - two people jointly owning a business - rather than how you've divided up the day-to-day work. If you truly wanted separate Schedule Cs, you would need completely separate businesses with separate bank accounts, separate clients, separate expenses, etc. Just dividing up tasks within the same business doesn't create two sole proprietorships.

How exactly does that work? Do you just upload your documents and they tell you what to do? Does it give actual tax advice?

I'm skeptical about using AI for something this important. How do you know their advice is accurate for your specific situation? Seems like you'd still need a human CPA to review it.

You upload your documents and the system analyzes them specifically for tax situations. It doesn't just give generic advice - it identifies the specific tax implications based on your documents and flags potential issues. In my case, it specifically identified that despite our incomplete registration, our operating practices made us a partnership for tax purposes. The system isn't replacing a CPA - it's more like having a tax expert review all your documents before you take them to your CPA. It helps you identify issues you might not even know to ask about, which is exactly what happened in my case.

So wait, this service just sits on hold with the IRS for you? How does that even work? I've been trying to get through to the IRS for weeks!

Yeah right. No way they can actually get through to the IRS faster than anyone else. The hold times are brutal for everyone. Sounds like a scam to me.

It's a service with a dedicated call system that maintains your place in the IRS queue. They have multiple lines going at once, and when they reach an agent, they connect you. You don't have to sit by your phone waiting - they text you when they're about to connect, and you jump on the call with the IRS agent already waiting. And it's definitely not a scam. Their whole business model is solving the IRS wait time problem. They can't control what the agent tells you - they just solve the problem of getting through to one. After struggling for weeks to get an answer about my LLC filing status, I got definitive guidance directly from the IRS in one day.

So if I understand correctly, the fact that my friend and I are splitting profits makes it a partnership regardless of the LLC registration? Would we have to amend our state LLC filing too, or just file the 1065 for federal taxes?

You've got it exactly right - sharing profits makes it a partnership for tax purposes regardless of the LLC registration. For state requirements, you should definitely amend your LLC registration to reflect both owners. While you could technically just file the 1065 for federal taxes without updating state records, having inconsistent documentation creates problems down the road - especially if there's ever a dispute between partners or if you face state tax questions. The small effort to update your state filing now prevents bigger headaches later.

Using turbotax for this - where do I indicate it's an LLC but filing as partnership? Is there a specific section for this?

Thanks for the TurboTax clarification! I'm actually in a similar situation and was wondering about the EIN issue. How do you know if you need a new EIN or can keep the existing one? Is there a specific form or process to convert from single-member to partnership EIN, or do you just apply for a completely new one?

Great question about the EIN! Generally, if your LLC was originally set up as a single-member entity and you already have an EIN, you can usually keep that same EIN when converting to partnership tax status. The IRS considers it the same business entity, just with a different tax classification. However, you should call the IRS Business & Specialty Tax Line at 800-829-4933 to confirm this for your specific situation. They can verify whether your existing EIN will work for partnership filing or if you need a new one. Some factors like when the EIN was issued and how it was originally classified can affect this. When you do call (or use a service like Claimyr that others mentioned to skip the hold times), have your current EIN and LLC formation documents ready. The agent can update your entity classification in their system if needed, which ensures your partnership return processes smoothly.

Great question! The IRS has specific rules about when you need a new EIN. If your LLC originally got an EIN as a single-member entity (disregarded entity for tax purposes) and now you're adding a second member, you typically DO need to apply for a new EIN because you're changing from a disregarded entity to a partnership for tax purposes. You don't "convert" the existing EIN - you apply for a completely new one using Form SS-4 or the online EIN application. When you apply, you'll indicate it's for a partnership (LLC taxed as partnership) and mention that you're changing from a single-member LLC. The old EIN becomes inactive once you start using the new partnership EIN. Make sure to update all your business accounts, contracts, and tax documents with the new EIN once you get it. This is actually a really important step that a lot of people miss!

For the EIN question, if your LLC originally got an EIN as a single-member entity (disregarded entity) and now you're adding a second member making it a partnership, you typically need to apply for a NEW EIN. The IRS considers this a change in entity type that requires a new tax ID number. You can't "convert" the existing EIN - you apply for a completely new one online at irs.gov using Form SS-4. When you apply, you'll select "Partnership" as your entity type and indicate it's an LLC electing partnership tax treatment. The process is pretty straightforward and you usually get the EIN immediately online. Keep your old EIN documentation though - you might need it for closing out any final single-member LLC filings or dealing with state requirements during the transition.

Great question! The EIN rules can be tricky. Generally, if your LLC was originally set up as a single-member entity with an EIN, you'll need to get a new EIN when it becomes a multi-member partnership for tax purposes. The IRS treats this as a new entity formation. However, there are some exceptions - like if you always intended it to be a partnership but just hadn't added the second member yet. The safest approach is to call the IRS Business & Specialty Tax Line at 800-829-4933 with your specific situation. They can tell you definitively whether you need a new EIN or can keep your existing one. If you do need a new EIN, you just apply online through the IRS website (irs.gov) - there's no special "conversion" process, you're essentially applying for a new business entity. Make sure to keep records of both EINs and the transition date for your tax records.

Great question! The EIN rules can be tricky. If your LLC already has an EIN and you're adding a partner (changing from single-member to multi-member), you typically need to apply for a new EIN because the tax classification is changing. The IRS treats this as a new entity for tax purposes. You can't "convert" an existing EIN - you have to apply for a completely new one through the IRS website or by calling their business line. Make sure to close out any accounts tied to the old EIN and update all your business banking, vendor accounts, etc. with the new EIN once you get it. The timing can be a bit tricky during tax season, so I'd recommend getting this sorted ASAP if you haven't already.