I'll admit it. I was talking about general partnerships, not publicly traded limited partnership interests which, as noted by Arthur Kamlet, is the dividing line - general parterns vs limited partners.
By the way, I don't much appreciate people who set things up to play "gotcha." I'm willing to learn. In fact, I'm here mainly to learn. I'm not here to play games.
I'm not sure that's a codified dividing line either. If you're a partner, you're not an employee, and to say so on paper may be self-dealing or it may not -- depends upon circumstances. Publically trading partnership shares might seem a clean way of avoiding the conclusion that it is not constructively an employment situation -- or it might not.
Don't bet the farm on it. Partnerships are rich in possibilities for setting up different share classes, fine-tuned ownership classes. But delve into making an involved partner an employee: and you may deserve what you end up getting. What you might get is some free post-mortem accounting work performed by the IRS.
Steve
I wouldn't bet the farm on anything associated with partnership taxation. And, I'll do a better job of starting any assertion about that topic with those two magic words, "In general."
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I do about 50 1065s a year and I can tell you now, if you're going to do
1065 work you'll need more than ONE semester course on Partnership accounting and taxation!Gene E. Utterback, EA, RFC, ABA
"It is rare to see questions asked in this board or many other tax boards about individuals who are limited partners." Huh?
Let's see if I can reconstruct some of this thread.
OP was discussing someone who apparently was a member of a multi-member LLC, was serving as Managing partner, and the LLC had not elected to be taxed as a corporation.
So we can conclude the LLC is taxed as a partnership, filing a 1065 and K-1's and all that good stuff.
Each K-1 identifies the partner, whether that partner is a general or limited partner, whether that partner is a domestic partner, whether that partner is a partnership, etc.
I'm not at all sure an LLC allows non-individuals to be members.
I have understood that when a multimember LLC files a 1065 each member is declared to be a general partner and not a limited partner.
The Borden Chemicals etc LP describes partnership, not an LLC.
So it is not right to mix an LP into the discusion of what OP stated is an LLC. The LLC is not a partnership even though it chooses to be taxed as a partnership. When it so chooses, it treats its members as general partners.
I'm not sure I agree with this logic.
True or false:
An entity can file to be an LLC with the state government. If that entity is a general partnership with both general and limited partners, then it would remain so for federal taxation purposes. The state LLC filing would limit the liability of the general partners, and would incur a state tax or fee of some sort, but would not alter the federal treatment, and would not change the nature of any partners.
Or is this not correct?
Steve
I believe whether an LLC may have members who are themselves partnerships is a matter of state law, to which I am pretty ignorant. I have never seen such an LLC but I also have never seen a purple cow, so that's not good logic.
But even if an LLC member could be an LP, the partners of the LP would not be partners on the LLC's 1065 just by being partners in the LLC Member.
Not correct as I understand LLC's.
An LLC is a brand new entity created by the state. It may succeed a partnership, but is not per se a continuation OF that partnership.
Like a proprietor incorporating and transferring assets into the corporation, or even into an LLC, the two business entities are separate. One form dies; the successor is born.
ChEAr$, Harlan Lunsford, EA n LA
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One of us has an incorrect understanding. The IRS tried to push this on the taxpayers back in 1997 (roughly) and they got kicked in the teeth by Congress, who required them to withdraw from that position and take no other position until they (Congress) sorted it out. That was over 10 years ago and Congress has yet to issue any formal guidance that I'm aware of.
Whence came your understanding?
Gene E. Utterback, EA, RFC, ABA
As I have been taught this subject (which could of course not be accurate), multi-member LLC's are taxed no differently from partnerships, and might have the same types of partnership agreements, including agreements that define general and limited partners.
(What I'm unclear of is whether the LLC aspect automatically affects the determination of the at-risk attribute, thus affecting basis and ultimately taxation.)
Steve
LLC's can elect to be taxed as corporations. If not they are taxed like partnerships.
partnership without a general partner (that is to say no one with personal liability). They were originally created because promotors (often of tax shelters) kept trying to create limited partnerships using a general partner that was judgment proof.
A popular method was to use a corporate general partner that was not highly funded. Sometimes the IRS would allow it to be taxed as a partnership, but sometimes as a corporation. Every prospectus for these investments included a lawyer's opinion that it should be taxed as a partnership, though some of those letters were on very shaky legal grounds.
On that score I'd imagine an LLC would be treated like a limited partnership.
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