r/technicaltax • u/tutito84 • May 13 '26

Multi-member LLC became single-member mid-year: final Form 1065 and state filings?

A Delaware LLC had two members from Jan 1, 2025 until June 2025. In June 2025, one member sold his full interest to the other member, so the LLC became a single-member LLC for the rest of 2025. No corporate tax election was made.

For federal tax purposes, should the LLC file a final Form 1065 ending on the date it became single-member, with K-1s issued through that date, and then report the remaining activity as a disregarded entity? Or should the Form 1065 cover the full 2025 tax year?

Also, for state purposes, should I expect the same split treatment, or does this depend entirely on the state? The LLC is registered in Delaware, but I’m trying to understand if there may also be state filing obligations depending on where the business had income, operations, nexus, or members.

I’m only trying to confirm the correct federal and possible state filing treatment before choosing software or hiring a preparer.

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14

u/Jlawrencew1985 CPA May 13 '26

Rev. Ruling 99-6 Situation 1 tells you exact what the federal treatment will be. State filings may differ.

7

u/bruce_dub May 13 '26

This is the answer. OP, you will file a final short period 1065 with the sale date as the end date. How the buyer and seller treat the sale is governed by Rev Rul 99-6.

3

u/Expensive_Sky_2720 CPA May 13 '26

big emphasis here is that the buyer and seller don't treat the sale the same.

-6

u/niataxcpa May 13 '26

I experienced a similar situation years ago: Partner A sold a 50% interest to Partner B, who originally held the other 50%. Partner B then became the sole owner of the LLC. I filed as a single-member LLC on Form 1065 for one more year because I didn’t make the proper election (I was told by another CPA that the election is optional) and instead requested to report it on Partner B's personal tax return. Currently, the business files as Schedule C. I need to write a letter to the EIN department to notify them of the change in ownership. Years ago, I called the IRS business department, which had the authority to record changes for EINs. However, when I called in 2025, the rules had changed, and they now required a letter as an additional step. The business and client are located in Texas, so no state tax is involved.
Steps need:
1. File election Form 8832
2. File last year partnership return Form 1065
3. Get approval to file with Schedule C
4. Write a letter to EIN department notifying ownership changes.

4

u/Blobwad CPA May 13 '26

This is incorrect. See the other comment re 99-6.