Single member LLC filed a partnership return

[kcindy]

We picked up a new client this year who already had their 2019 return done for their business. They weren't happy with their preparer, so they came to us to prepare their personal returns and double-check their business return.

According to their EIN letter from the IRS (dated 2009), the EIN was issued for a single-member LLC.

The business filed Form 1065 as a two-person partnership for 2018 & 2019. (The son joined his father in the business. The father filed Schedule C for 2017 and earlier years.)

The business should have applied for a new EIN when they made the switch from single-member to multi-member LLC.  We'll apply for a new EIN for them now.

But should we do with the two Forms 1065 for 2018 & 2019? In those years, the business was actually a partnership between father and son that filed a partnership return, but used a "disregarded" EIN.

Suggestions?

[Just-Lisa-Now-]

Did they Efile it?  Im surprised it didn't bounce back for the EIN being the wrong entity type.   

[kcindy]

They did e-file them.

Maybe they don't need a new EIN at all ...

I'm seeing conflicting information on different parts of IRS.gov ... if anyone has any clarification about whether an LLC needs a new EIN when it moves from one to multiple members (or vice versa), I'd appreciate it. The hold times with the IRS are insane. (Go figure).

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There's this from https://sa.www4.irs.gov/modiein/individual/help/help-toc.jsp

Limited Liability Companies

You will be required to obtain a new EIN if the following statement is true:

• A corporation files papers with the state to convert to an LLC and will use the default classification of partnership. (The corporation is treated as if it has liquidated in this case.)

You will not be required to obtain a new EIN if the following statements are true:

• A corporation files papers with the state to convert to an LLC and will elect via Form 8832 to be taxed as a corporation.
• The number of members in the LLC changes from more than one member to a single member.
• The number of members in the LLC changes from a single member to more than one member.
• A sole proprietor files papers to become a state recognized entity, organizes as an LLC, and will file Form 8832 or Form 2553 to elect to be treated as a disregarded entity or taxed as a corporation or small business corporation.

=============

And there's this from https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein -- which seems to avoid the issue entirely but makes it seem like a new EIN is required when a single-member LLC changes to a multi-member LLC because LLC's aren't a real thing and a new EIN would be required if a sole-proprietorship were to change to a partnership or vice versa.

Limited Liability Company (LLC)

An LLC is an entity created by state statute. The IRS did not create a new tax classification for the LLC when it was created by the states; instead IRS uses the tax entity classifications it has always had for business taxpayers: corporation, partnership, or disregarded as an entity separate from its owner, referred to as a “disregarded entity.” An LLC is always classified by the IRS as one of these types of taxable entities. If a “disregarded entity” is owned by an individual, it is treated as a sole proprietor. If the “disregarded entity” is owned by any other entity, it is treated as a branch or division of its owner. 

You will be required to obtain a new EIN if any of the following statements are true.

• A new LLC with more than one owner (Multi-member LLC) is formed under state law.
• A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.
• A new LLC with one owner (Single Member LLC) is formed under state law, and has an excise tax filing requirement for tax periods beginning on or after January 1, 2008 or an employment tax filing requirement for wages paid on or after January 1, 2009.

You will not be required to obtain a new EIN if any of the following statements are true.

• You report income tax as a branch or division of a corporation or other entity, and the LLC has no employees or excise tax liability.
• An existing partnership converts to an LLC classified as a partnership.
• The LLC name or location changes.
• An LLC that already has an EIN chooses to be taxed as a corporation or as an S corporation.
• A new LLC with one owner (single member LLC) is formed under state law, does not choose to be taxed as a corporation or S corporation, and has no employees or excise tax liability. NOTE: You may request an EIN for banking or state tax purposes, but an EIN is not required for federal tax purposes.

[BobKamman]

“You will not be required to obtain a new EIN if the following statements are true:

...The number of members in the LLC changes from a single member to more than one member.”

And there is nothing in the other instructions you quote that contradicts this.

I would focus on whether the correct return is being filed, not whether some account number is correct. If the old EIN’s shoe fits at IRS, then keep wearing it.

[AvidReader]

Were any notices ever sent out by the agency because the business filed Form 1065 using an EIN issued for a single member LLC?  I've seen a multi-member LLC EIN used on a Schedule C and it never generated any notices.  The business owner ran a single member LLC and was treated as a disregarded entity although he applied for the multi-member EIN for a partnership that was never formed.