LLC After Divorce

Today TaxMama hears from Marina in Washington DC in the TaxQuips Forum with an interesting set of questions. She says. “A husband and wife are divorced. They owned an LLC. The wife wants out. Can the husband keep the same EIN? Can he elect to treat the single member LLC as a S Corp.?” http://taxmama.wpengine.com/forum/taxquips/llc-for-hw-after-divorce/


Hi Marina,

Excellent questions. I am glad you asked.

1) Yes, he may keep the same TIN for the LLC.  If it had been purely a partnership, it would have dissolved when 50% of the ownership changed hands.  That’s one of the advantages of the LLC. It doesn’t dissolve.

 2) If it was being filed on a Form 1065, he will automatically have to switch to a Schedule C, if the LLC has only one member.

 3) However, yes, he may make the election to be an S Corporation.

 4) How? Form 2553 allows him to make the S Corp election.

5) When, as soon as there is only one owner, he must make the election immediately. I am not sure how much time he has after the change.  Read the instructions to the Form 2553 and Form 8832.

6) As to the Form 8832, do you ALSO have to file it? No. Once you have made the election on Form 2553 – the S Corporation election form, you don’t also need to use Form 8832. They changed that procedure in 2008, I believe.

And remember, you can find answers to all kinds of questions about divorce and split businesses, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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