Single to multi member LLC conversion done it? is it worth it?

Question

Just wondering what the implications are of changing a single member LLC to a multiple member LLC as far as current depreciation, basis, carry forward losses and any other issues.  Consulting a lawyer and accountant when tax season slows down but has anyone done this? Apparently there is an advantage to a multimember LLC as far as RI inheritance tax but I am not sure in the end if it is better. I am also not sure if we would be creating an issue or solving one.   A single member LLC may not have been the best choice in the first place but that is a separate issue that we may need to address.

Basit Siddiqi · Answer

If you have a single member LLC that changes to a multi-member LLC, you may have a 754 adjustment for the increase in basis of the partnership assets.I.E. Property is purchased for $100,000 when it is a single member LLC.Property appreciates to $200,000 and partner B buys 50% into the partnership when the property is valued at $200,000He should be able to depreciate 50% of the $200,000 building which is $100,000 instead of $50,000

Colleen F. · Answer

@Basit Siddiqi  thanks for you help especially in your busy season!  We are seriously considering this to decrease inheritance tax as shares in a property are considered differently in RI for inheritance. I Know it will complicate taxes  because we have to file as an individual and then for the LLC  but there is a fair amount of depreciation and carry forward losses for us to consider, not sure when those will be completely written off.  We are still deciding if it will be a 2 or 3 way split.