schedule K-1 for company that shut down without notice

[needlegalhelp8]

This is my first post in this forum, and I hope I can get some good advice for my situation. Please help.

Last year, I invested into a restaurant startup, which is under an LLC. The restaurant opened and was generating great sales, according to the managing partners and owners. It was on track to meet or exceed its estimates. Then suddenly, early this year, the restaurant closed. One of the owners had closed the restaurant without notifying or getting approval from the other owners, partners, and investors like myself. Now, the partners are trying to get a hold of that owner who initiated the closing and to get some answers (as well as the money). I am currently waiting for answers as all of their lawyers work at it.

Lately, I received several emails from that rogue owner, asking me for personal information such as my social security number. He said it is needed so that he can send me my Schedule K-1. According to him, I cannot file my personal income tax return until I receive the Schedule K-1.

My question is, should I give this person my personal information? Do I really need to submit a Schedule K-1 under the circumstances that I am in now? I am in regular contact with the other partners as they work through the legal obstacles with that owner. They said I do not need the K-1. Is this true? I could use some MUCH needed legal advice.

Thank you.

 

[LdiJ]

This is my first post in this forum, and I hope I can get some good advice for my situation. Please help.

Last year, I invested into a restaurant startup, which is under an LLC. The restaurant opened and was generating great sales, according to the managing partners and owners. It was on track to meet or exceed its estimates. Then suddenly, early this year, the restaurant closed. One of the owners had closed the restaurant without notifying or getting approval from the other owners, partners, and investors like myself. Now, the partners are trying to get a hold of that owner who initiated the closing and to get some answers (as well as the money). I am currently waiting for answers as all of their lawyers work at it.

Lately, I received several emails from that rogue owner, asking me for personal information such as my social security number. He said it is needed so that he can send me my Schedule K-1. According to him, I cannot file my personal income tax return until I receive the Schedule K-1.

My question is, should I give this person my personal information? Do I really need to submit a Schedule K-1 under the circumstances that I am in now? I am in regular contact with the other partners as they work through the legal obstacles with that owner. They said I do not need the K-1. Is this true? I could use some MUCH needed legal advice.

Thank you.

A multiple member LLC elects to be either a partnership, or a corporation (most likely operating as an S-Corp). In either circumstance the profits or losses flow through to the members personal returns on a Schedule K-1.

So yes, you really do need a Schedule K-1. However it is not a disaster if you do not have one. You can file your return as normal, and then amend it later to include the eventual K-1.

I would be somewhat leary of giving your information to the "rogue" partner at this time. I would be wanting to see the books of the restaurant to determine what should actually be showing on the K-1. I would not want to be assigned profits that did not really exist.

Am I correct to assume that the owner/partner who shut the restaurant down was the one who was actually operating/managing the restaurant?

Here is what I suspect has happened. I suspect that even if the restaurant had lots of customers that it was actually losing money. This is really common with a start up restaurant. I suspect that when the original investment money ran out that the partner who was operating the restaurant had no choice but to shut it down. The partner may have even thrown some of their own money into the operation hoping to keep it going until it was profitable.

If the partner is trying to do things right, then your Schedule K-1 would show a loss, which you would be able to take against your other income to the extent of your basis. (your investment)

However, again, I would want to see the books, or the draft of the partnership/S-Corp return to get an idea of what is going on, before giving out my information.

I doubt very much that the partner took off with any money. Its possible that he could have taken off with some, but its more likely that it was all spent, and that is why the restaurant had to close.

 

[needlegalhelp8]

You are correct that the owner who closed the restaurant also managed the books. If I don't submit my Schedule K-1 along with the rest of my tax forms, how much time do I have before I must submit it? It seems unlikely that investors like myself will see the books soon. That owner has left the country. All communication has been with his lawyer.

 

[tranquility]

I'd estimate it on relevant facts, put on a statement to that effect and amend as necessary.