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Business gone awry?

I was a partner in a business until last year, when I left, and there are hard feelings between my former partner and I. She had prepared our tax returns in the past, and even though she is keeping the business, I feel it's unlikely I will receive a K1 from her for my taxes this year. It was a service based business, so it was mostly just service revenue, and expenses. Should I just figure out what my proportionate share of each was, and plug it into the K1 area on my taxes?

Mar 08, 2012 by William from Alpharetta, GA in  |  Flag
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4 votes

It is unfortunate that you had an acrimonious break-up with your business partner, but this does not nullify your mutual obligations under the law or pursuant to the company operating agreement, if there is one.

If you are still an equity partner in the business, and your former partner is the tax matters partner, then she is obligated to provide you with a K1. Moreover, it is very important for you to clarify the nature of your ongoing equity participation in the business. Her failure to provide you with appropriate tax documentation could leave you with a nasty tax liability and no cash to pay for it. You also may have personal liability exposure if you are a listed member / manager and the entity has not complied with all applicable laws and regulations, or if it has not completing timely tax filings.

I encourage you to re-establish contact with your former partner. If necessary, work with a financial advisor or CPA to obtain the necessary information on your behalf. You will want to document each meeting and the ultimate resolution of your dispute. In my experience it is best to directly confront a difficult business situation such as yours in a timely manner. The longer you wait, the bigger any problem is likely to become. Good luck to you, and do not hesitate to post any further questions or comments.

1 Comment   |  Flag   |  Mar 08, 2012 from San Francisco, CA
Mike

excellent advice

Flag |  Mar 08, 2012 near San Diego, CA

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