As a first matter, you should be filing as a sole proprietor
for federal purposes - a single member LLC can have one of
two statuses - taxed as a corporation (which you generally
don't want) or treated as a disregarded entity. If treated
as a disregard, then the owner (i.e., the single member)
files as a sole proprietor for federal purposes.

That being said, you will need to check on the IRS pubs
about changing the status of an entity, because going from
partnership status to disregard status will be treated as a
liquidation of the entity, which might have further tax
consequences for you (although not likely to be big, maybe
you even get a useable loss out of it - do the numbers or
check with your accountant).

I don't have any idea what Arizona filings are like, but as
a general matter they must have a method for keeping track
of single member LLCs whose owners file as sole proprietors
(and you may still have a franchise return to file each
year, along with a small franchise tax) so it's unlikely
that they'll miss you or assume you weren't filing if you
file the proper forms now.

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newsbirdie2[at]hotmail.com wrote:

- quote -

Before you file anything, best to check Arizona law and make
sure your LLC is still valid. In states I know the LLC
must file a state return and pay a fee each year to remain
active. Check it out.

ChEAr$,
Harlan Lunsford, EA n LA
Mon 21 Mar 2005

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I have a LLC that has been inactive for the past 5 years
because I've been living in a foreign country. In hindsight
I should have just shut it down but I didn't expect to stay
this long in the foreign country and it looks like I might
stay a few more years or even longer. My company is a small
(one person, myself) consulting company. I initially set up
an LLC because I had a partner who didn't stay long. To keep
two people I put down my mother as a partner but then I
didn't want her sharing the profit/loss so I even put her
down as 0%. So one year I got a letter from the IRS saying
I don't even need to file 1065 since I'm just one person.
But I continue doing so because I don't know how that works
in Arizona where the LLC legally resides.

My income from the business is $0 for the past 4 years. I
don't see much reason to keep the LLC alive other than the
reason that perhaps in the future I may want to return to AZ
so it's easier to keep it alive than shut it down and create
a new one.

So I see two options: Can I put the business into
"hibernation"? I don't want to have to file returns every
year saying I have zero income. Actually it's not that
hard, but it just seems pointless and a waste of time for me
and the IRS.

Second option is I start filing as a sole proprietorship as
the federal IRS has instructed me to do. I'm not sure what
will happen in the Arizona database though. They must have
my partnership ID on file and if I ever use the LLC with
another partner and file 1065 & 165, AZ will think I didn't
file returns for the period in between. I don't want to pay
the $500 penalty for each year, that would be expensive.

If anyone has any ideas I'd be very grateful. For this year
I will file my return 1065/165 it's easy to do with all
zeros. But I'd like to do this properly for next year.

Thanks,
Michael

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