Poor Business Bookkeeping for Small Business, Can I Still Save My Business if I Get Everything Squared Away?

I started a small business with a friend of mine, 3 years ago. He was in charge of the bookkeeping, so i trusted everything would go smoothly. well he was filing our taxes and what not every year but he never used any of our receipts for supplies that we bought as a write off…we have a general Partnership and over the time he has become very lazy so he agreed to leave the business. I want to convert our General partnership to an LLC to start fresh and do it the right way instead of depending on someone to do it for me.. If i do that what would be the best steps to take for bookkeeping for my small business and for my tax write offs? Thanks so much. My only other option is to stop business all together and start fresh with a new business name and everything.

Suggestion:

Your situation is not at all – unfortunately – unusual. Most new businesses begin with the best of intentions between partners but often the challenges of running a new business forces a reassessment that can become very difficult.

To answer your question simply, a General Partnership of two individuals cannot continue if one wishes to leave. The GP must go through dissolution. Afterward, you can personally choose to form a new LLC and contribute the assets you received in the dissolution from the GP.

Let us be very clear, this is a process with legal & tax liabilities. You should contact an attorney to protect your rights and ownership. You should also contact an Accountant because you have three tax critical matters requiring attention:
1. Verify that all the GP's tax and legal reporting responsibilities have been properly paid and filed. Your accountant can also review the business expenses you say were left off the tax filings and determine if amended returns (Partnership and personal) are possible and to your advantage.
2.The dissolution of the GP's assets and liabilities are recorded and divided properly to allow the maximum tax advantage (or minimize to tax liability) to you personally and ultimately the new LLC.
3.The contribution of your assets to the LLC from assets originally from the GP, again, to allow the maximum tax advantage (or minimize to tax liability) to you personally and ultimately the new LLC

Your accountant can also advise you on the best bookkeeping strategy going forward.

Good luck!

Karl Sexton
Accounting On-Call LLC
Accounting | Quickbooks | Tax | Bookkeeping
Lutz/North Tampa FL
(813) 641-4262
www.accountingoncall.com