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I have a small partnership. One partner just left. No buy out or anything. Can the remaining partner choose to claim all the profit at end of year to not allocate the percent to the partner that left?
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Terry53029
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Normally when one partner leaves a two-member partnership, the business typically dissolves, requiring a formal winding-up process involving addressing liabilities, distributing assets, and potentially buying out the departing partner's interest. The specific steps and outcomes will largely depend on the provisions outlined in the partnership agreement and applicable state laws.
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The one partner will keep the company and it will become a schedule C filing. This partner is assuming all liabilities and keeping all assets.
The partner that left was never active, did not bring anything to the partnership other than business in the beginning.
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You don't mention when the partner left. If it was at year end, you would prepare a final 1065 with the income or loss split as was done in the past. If he left during the year, you would prepare the 1065 for the period that he was there, with the regular split of income or loss between partners. The remaining partner would then prepare a schedule C for the remaining portion of the year.
Slava Ukraini!
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".....wanted to assume all profits of the business".
I think what the partnership agreement states may take precedence over what is 'wanted' by the remaining individual.
