Can Two LLCs Form A Partnership?

Can Two LLCs Form A Partnership

Two LLCs can form a partnership but both LLCs need to update their LLC operating agreement and the partnership’s operating agreement to reflect the change. The operating agreement must include information regarding how the ownership is structured and who will be involved in the management as well as the control of the two entities. Depending on the state law you also have to file a document with your secretary of a state reflecting the change of ownership.

Key Takeaways

  • LLC stands for Limited Liability Company and it is a US-specific form of a private limited company
  • An LLC can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation
  • In order to form a partnership you have to create an Articles of Organization and then file in the Organization with your secretary of state’s office
  • You also have to file Form 1120 with the company’s U.S. Corporation Income Tax Return

How To Form Partnership LLC

Partnership LLC

The process of forming a partnership is very simple. Here are the steps that you should follow if you want to form a partnership with two LLCs.

1. First, you have to create an operating agreement that will specify each member’s role in the company. Moreover, it should contain information on how partners will make decisions as well as the process of adding or removing partners.

2. Now choose a name for the partnership LLC and register it with your secretary of state

3. Then publish a notice in local newspapers announcing your intent to form an LLC

4. Finally, create an Articles of Organization and then file in the Organization with your secretary of state’s office

If an LLC chooses to file as a corporation the LLC needs to: 

1. Complete The Entity Classification Election, Form 8832. Before the form is submitted to the IRS, all of the LLC’s members must sign Form 8832

2. File Form 8832 within 12 months of the election

3. Include a copy of Form 8832 when filing the initial tax return for the LLC

4. File Form 1120 with the company’s U.S. Corporation Income Tax Return

Other Schedules And Forms You May Have To File

1. Schedule A (Form 1040 or 1040-SR) to deduct interest, taxes, and casualty losses not related to your business

2. Schedule E (Form 1040 or 1040-SR) to report rental real estate and royalty income or (loss) that is not subject to self-employment tax

3. Schedule F (Form 1040 or 1040-SR) to report profit or (loss) from farming

4. Schedule J (Form 1040 or 1040-SR) to figure your tax by averaging your farming or fishing income over the previous 3 years

5. Schedule SE (Form 1040 or 1040-SR) to pay self-employment tax on income from any trade or business

6. Form 461 to report an excess business loss

7. Form 3800 to claim any of the general business credits

8. Form 4562 to claim depreciation (including the special allowance) on assets placed in service in 2019, to claim amortization that began in 2019, to make an election under section 179 to expense certain property, or to report information on listed property

9. Form 4684 to report a casualty or theft gain or (loss) involving property used in your trade or business or income-producing property

10. Form 4797 to report sales, exchanges, and involuntary conversions (not from a casualty or theft) of trade or business property

11. Form 6198 to apply a limitation to your loss if you have a business loss and you have amounts invested in the business for which you are not at risk

12. Form 6252 to report income from an installment agreement

13. Form 8582 to apply a limitation to your loss from passive activities

14. Form 8594 to report certain purchases or sales of groups of assets that constitute a trade or business

15. Form 8824 to report like-kind exchanges

16. Form 8829 to claim actual expenses for business use of your home

17. Form 8990 to determine whether your business interest deduction is limited

18. Form 8995 or 8995-A to claim a deduction for qualified business income

What Information Is Required In Articles Of Organization

An Articles of Organization proves the existence and registration of the LLC. An Articles of Organization must have the following information:

1. Business name

2. Principal place of business

3. The purpose of your LLC

4. The term (duration) of your LLC

5. The name and address of the registered agent

6. How the LLC will be managed

7. Member names/addresses

8. The amount each member contributed to the LLC

What Information Should Be Included In The Operating Agreement

Operating Agreement

An operating agreement is very important because sometimes the Articles of Organizations can be very minimal and it doesn’t contain information governing the LLC. On the other hand, the operating agreement specifies all governing aspects of the LLC. Therefore, the Operating Agreement contains high-level information. Below is the information that you should include in the Operating Agreement:

1. Voting rights among members

2. Issuing and transferring interest among members

3. How a new member will join

4. if the members will allow a new member to join the LLC

5. Profit/loss allocation to each member

6. How the LLC will be dissolved

7. What happens if a member dies, goes bankrupt, becomes incapacitated, or gets a divorce

8. Financial provisions, including the specific accounting method

9. The roles and responsibilities of each member

List Of 5 Best States To Start An LLC

Best States To Start An LLC

1. Delaware

2. Nevada

3. Wyoming

4. Alaska

5. South Dakota

Advantages Of Opening LLC in Delaware    

1. Business-friendly

2. Streamlined filing process

3. Low filing fees

4. Low franchise taxes

5. No corporate income taxes for foreign LLCs

6. Court of Chancery for businesses

7. Lots of business experience

Advantages Of Opening LLC In Nevada

1. No corporate or personal income taxes

2. No franchise taxes

3. Anonymity in public filings

4. No information-sharing agreements with the IRS

5. No requirements for operating agreement or annual meetings

Advantages Of Opening LLC In Wyoming

1. Minimal reporting obligations

2. No corporate or personal income taxes

3. No franchise taxes

4. Lifetime proxy option

5. Low sales tax rate

Advantages Of Opening LLC In Alaska

1. No state income tax

2. No state sales tax

3. Low tax rates in general

Advantages Of Opening LLC In South Dakota

1. No state income tax

2. No corporate tax rate for LLCs treated as a corporation



Last Updated on October 25, 2022 by Magalie D.

Scroll to Top