LLCs Taxed as Partnership Need to Adopt a Tax Audit Agreement ASAP

Question 1:  My multi-member LLC is taxed as a partnership.  Does it need to amend its Operating Agreement because of the new partnership tax rules that become effective on January 1, 2018?

Question 2:  My multi-member LLC is taxed as a partnership.  It does not have an Operating Agreement.  Do the members of my LLC need to sign an Operating Agreement because of the new partnership tax rules that become effective on January 1, 2018?

Answer:  Yes, yes and yes until I am blue in the face.  All LLCs taxed as partnerships should amend their Operating Agreements or better yet adopt a stand alone Tax Audit Agreement drafted to deal with the new tax audit rules that take effect on January 1, 2018.  The new partnership audit rules created by Section 1101 of the Bipartisan Budget Act of 2015, P.L. 114-74, and amended by the Protecting Americans From Tax Hikes Act of 2015, P.L. 114-113 affect all multi-member LLCs taxed as partnerships for federal income tax purposes.

I am an LLC attorney with a masters degree in federal income tax law from New York University School of Law who has formed 9,300+ Arizona LLCs and prepared 9,300+ Operating Agreements. As a partnership tax law attorney I recommend:

• All LLCs taxed as partnerships amend their Operating Agreements to include language that deals with issues that may arise under the new partnership tax audit rules that take effect on January 1, 2018.

• All LLCs taxed as partnerships that do not have an Operating Agreement signed by the members should adopt an Operating Agreement that includes language that deals with issues that may arise under the new partnership tax audit rules that take effect on January 1, 2018.

Warning

The members of an LLC taxed as a partnership risk substantial economic harm if the IRS audits their LLC and they have not adopted an agreement that properly addresses the issues that arise under the new tax audit rules that apply to tax years after December 31, 2017.

If you don’t believe me then read “LLCs Taxed as Partnerships Must Adopt a Tax Audit Agreement” in which 34 attorneys and CPAs recommend that LLCs taxed as partnerships amend their Operating Agreements for the new tax audit rules.

For more on this important topic see my tax audit agreement blog posts.

Hire Me to Prepare a Tax Audit Agreement for Your LLC that Has Partnership Tax Audit Provisions & Names a Partnership Representative