I have been saying for some time that LLCs that are taxed as partnerships must amend or adopt an Operating Agreement that contains well-drafted language that deals with the new partnership tax audit rules that become effective on January 1, 2017. Here are some pertinent quotations taken from an article written by Vidya Kauri of the firm Friedman, LLP:
“the need for robust and all-encompassing partnership agreements that can curtail representatives’ powers and hold them legally accountable.”
“Partnership agreements will have to be very specific about the decision-making powers of partnership representatives and the process for designating and terminating them”
“partnership representative might also require insurance coverage to defend against allegations of wrongdoing by disgruntled partners”
The bottom line is that LLCs taxed as partnerships MUST amend their Operating Agreements to include well-drafted provisions that deal designate an initial partnership representative and his or her replacement and that address other important issues that arise under the new tax audit rules. If your LLC is taxed as a partnership and it does not have an Operating Agreement, the members will be foolish if they don’t sign an Operating Agreement that appoints a partnership representative and deals with the new tax audit rules.
Hire the Keyts to Prepare or Amend an Operating Agreement
I have a masters degree in federal income tax law from New York University School of Law. I have also prepared 7,800+ LLC Operating Agreements. Since 2016 I have included partnership representative language in my multi-member LLC Operating Agreements.
We’ve made it very easy to hire us to amend an existing LLC Operating Agreement or prepare a new Operating Agreement with partnership tax audit provisions. The first step to hire us is to go to our Buy an Operating Agreement page.
If you have questions about adopting or amending an LLC Operating Agreement, call LLC attorney Richard Keyt at 480-664-7478 or send an email to Richard at firstname.lastname@example.org. You may also call Richard’s son LLC attorney and former CPA Richard C. Keyt at 480-664-7472 and email at email@example.com.