Question

Removed from LLC but name still on business checking account

Forum|Forum|3 years ago
December 21, 2022
2 replies
0 views

Hello

I'm curious if there will be any tax implications for me - and if so how can I resolve them - based on my current standing with a business I used to be apart of.

My business partner and I started an LLC in 2016. It was a 50:50 split. Due to more important life situations, I asked to be removed as a partner, giving me business partner 100% ownership. I was removed in 2020.

However, I recently realized that my name (and SSN) is still apart of the business checking account we had together. Within the account we have a 50:50 split. I recently tried to remove myself, but because it's 50:50, the bank has to close the account and open a new one with just my business partner so that I'm fully removed.

With that said, and with some of the new laws from the IRS, should I be concerned from a tax perspective? I don't receive any salary or payment from the company, but the bank account is still used to run the business. Note: this is a side business and it doesn't have a lot of cash flow, ~$1,000 - $2000 worth of withdraws and deposits a month.

I'm looking to get myself removed from this business checking account as soon as possible, but I am concerned about the potential implications for the 2021 tax year.

Any insight / help would be extremely beneficial.

A

Anonymous_

Employee

@Rick19744

Note that the mere fact that your name is on a business checking account would not necessarily have any federal income tax implications assuming your withdrawal from the LLC as a member was handled properly.

I

ItsMeZee23Author

Thank you for the quick reply!

Yes - I was properly removed from the company.

My name and SSN are associated to the business checking account, but it sounds like that's a non-isssue from a tax perspective because I'm completely dissociated with the LLC. Do I have that right?

A

Anonymous_

Employee

Did you receive a final K-1 (1065)?

Rick19744

Employee

You answered the main question I had when you replied that you received a final K-1.

From a tax perspective, this is key and any final gain or loss needs to be determined in the year of the final K-1.

Having said that, I strongly recommend you get yourself removed from the business checking account. Just because there may be some time and administrative inconveniences in doing so, you need to be off this account to protect yourself; and sooner rather than later.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.