In 2024, my spouse and I started two small LLCs after I left my job and began doing contract work. Around the same time, we started renting out a condo we owned and moved in temporarily with relatives to cut costs.
When we first set everything up, we listed both LLCs as partnerships because we assumed that was the only way for both of us to share ownership and profits.
Then when we filed taxes last year, our accountant treated both businesses more like single-member LLCs and told us it would save money and simplify the return. Our total filing bill was under $800, so we didn’t question it much.
Now we’ve moved to another state and are using a new CPA. They’re telling us the prior filings may need corrections, that partnership returns should have been filed, and that this year alone could cost around $2,500 in business tax prep. On top of that, they’re recommending amendments to prior returns and restructuring the entities going forward.
Between amendments, current filings, and changing states, it sounds like we could be looking at several thousand dollars just in accounting fees.
The frustrating part is these businesses are still small and not generating huge income. I’m starting to feel like choosing the partnership route created way more complexity than it was worth.
At this point I’m honestly wondering if it makes more sense to simplify everything, convert to single-member LLCs, or even dissolve one of them.
Has anyone else dealt with something like this?