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Old 04-20-2015, 03:13 PM
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Question Can the onus of filing 'final' LLC tax return (form 1065) be on a passive partner ?

The LLC partnership terminated in Oct 2014 due to the fact that 3 passive/silent members sold interest to the remaining 1 active "member manager", who now continues to run the business as a single-member LLC. According to the tax laws, who is responsible for engaging a CPA, preparing the 'final tax return' (form 1065) and having it filed on time before the IRS deadline (which is the 15th day of the 4th month after the partnership termination)?

Can the 3 passive/silent members be held responsible for the LLC not filing the 1065 on time - even though the 3 silent members have filed their personal tax returns on time, including the anticipated K-1 (which the LLC has not yet filed with IRS) ?

The Partnership Operating Agreement does not address the scenario of which member is responsible for the activity of filing the LLC's tax return. Kindly advise what the IRS tax law says about this. Thank you!



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Old 04-20-2015, 11:31 PM
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The LLC partnership terminated in Oct 2014 due to the fact that 3 passive/silent members sold interest to the remaining 1 active "member manager", who now continues to run the business as a single-member LLC. According to the tax laws, who is responsible for engaging a CPA, preparing the 'final tax return' (form 1065) and having it filed on time before the IRS deadline (which is the 15th day of the 4th month after the partnership termination)? =======>> Form 1065 is not considered to be a return unless it is signed by a general partner or LLC member manager. The partner's "activity" is irrelevant to if a return is required. Period. The LLC needs to file short year return . LOTS of people want to end a partnership without a final partnership return. It would avoid a big bunch of income. The government doesn't like that. You can't say "final" on just one partner since the partnership is finished you need to wind it up. The LLC is deemed to terminate despite continuing operations occurs as the MMLLC becomes the SM LLC. the So, the MMLLC is deemed to have terminated on Oct 2014 when Interest was sold to you.LLC, is subject to strict reporting requirements by the IRS, and several forms must be filed with the IRS before the LLC is permitted to dissolve. If you do not file the necessary returns or pay the outstanding liabilities, state will suspend or forfeit your business entities status. As a result, the Secretary of State will not accept any termination documents you file.

Can the 3 passive/silent members be held responsible for the LLC not filing the 1065 on time - even though the 3 silent members have filed their personal tax returns on time, including the anticipated K-1 (which the LLC has not yet filed with IRS) ?==========I think so;

the penalty for failure to file a partnership tax return on time applies to all partners in the LLC. Penalty for filing the 1065 on time is for both GP/LP in the LLC ;llc will generate both the 1065 for the partnership and K-1's for each of the partners. If the LLC can prove that there is reasonable cause, the LLC can get the failure to file a partnership tax return penalty abated

The Partnership Operating Agreement does not address the scenario of which member is responsible for the activity of filing the LLC's tax return. Kindly advise what the IRS tax law says about this. Thank you!=======>>>>>As mentioned above; partnership return Form 1065 is not considered to be a return unless it is signed by a general partner or LLC member manager.in my experience limited partner can file return but it needs GP’s sign. only a general partner or member-manger of an LLC may sign a partnership return. With the regs being so ambiguous and the instructions so specific, it seems that the IRS has tried to clarify the regs with the instructions. If a LP or a non-member manager signed , you could probably argue based on the regs that this is allowed. You should assign one partner as the Tax Matters Partner. Generally, your MMLLC agreement dictates who can sign such a document



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Old 04-28-2015, 09:48 PM
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Hi, thank you for your response.

Our MMLLC Operating Agreement has an Addendum signed by all partners at the time of the sale of interest. You can call it a Sale Agreement if you will. The wording we have there is: "This addendum transfers all rights, responsibilities and liabilities of XYZ llc to partner A, therefore partner B,C,D are released from any and all responsibilities and liabilities of XYZ llc. Partner B,C,D release all rights to any distributions for tax year 2014 and are released from any tax liabilities incurred during tax year 2014 and also released from any and all liabilities that may occur if amended tax returns are required for tax years 2012 and 2013."
Would you consider the above clause to clarify the question of if passive members B, C and D would be held responsible for preparing and filing the taxes for the year 2014 ?
Thanks much.



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Old 04-29-2015, 09:56 AM
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Originally Posted by mechmonk View Post
Would you consider the above clause to clarify the question of if passive members B, C and D would be held responsible for preparing and filing the taxes for the year 2014 ?
Thanks much.
As said, your LLC return is filed by the LLC itself or the owners/responsible person. That appears to be you; the LLC’s tax year ends on the date of termination;as the LLC was terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. The LLC return must show the names and addresses of each partner and each partner's distributive share of taxable income. The return must be signed by A, a general partner, and one of its members must sign the return.

However, an LLC is not considered to engage in a trade / business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes.



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Old 04-29-2015, 12:23 PM
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Just to clarify, I am not partner A. I am one of B, C, D - so it is not me who is the responsible partner for the act of signing the tax return as I am not the general member manager.

My question was, if partner A who is the active partner running operations and maintaining books DOES NOT engage a CPA and misses the deadline for filing the Final Return for the short year, are partners B, C, D (who are passive and not involved in operations or books) held responsible for this failure by A to file the final return on time.

Thank you.



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Old 04-30-2015, 10:12 AM
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Quote:
Originally Posted by mechmonk View Post

My question was, if partner A who is the active partner running operations and maintaining books DOES NOT engage a CPA and misses the deadline for filing the Final Return for the short year, are partners B, C, D (who are passive and not involved in operations or books) held responsible for this failure by A to file the final return on time.

Thank you.
i do not think so; A is responsible for the failure in the situation. i guess
aslongas form 1065 for 2013 was prepared / signed and filed by the active member runing the operations for tax year 2013. in general, a partner/member who runs/manages the operations of the llc , and prepares/ keeps the books is fundamentally responsible for filing the 1065, even if all of the llc members are also responsible for the failure.Actually, tmp, i mean the responsible person listed on the return is responsible foe in other similar cases.however, you may alk to other members on the issue.

LLCs have a lot more flexibility than S or C corps, so, members must enter into a very detailed agreement that spells out the division of profit, the division of management authority and responsibility, your rights to withdraw capital, and your responsibilities to contribute new capital as needed.
These can get very complicated and difficult to understand, and you may end up requiring an attorney to untangle them



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Old 04-30-2015, 10:13 AM
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Originally Posted by mechmonk View Post
Just to clarify, I am not partner A. I am one of B, C, D - so it is not me who is the responsible partner for the act of signing the tax return as I am not the general member manager.

My question was, if partner A who is the active partner running operations and maintaining books DOES NOT engage a CPA and misses the deadline for filing the Final Return for the short year, are partners B, C, D (who are passive and not involved in operations or books) held responsible for this failure by A to file the final return on time.

Thank you.
sorry i guess nobody can give you accurate answer on your issue;you may need some professional legal assisstance



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