Partnership Tax Planning
Partnerships and limited liability companies enjoy substantial tax advantages compared to corporations. They avoid the “double-tax” imposed on the income of large or publicly traded C corporations, and they also enjoy much greater flexibility than S corporations. These advantages come at the cost of considerable tax complexity.
Seemingly simple transactions, which would not require tax planning if done in a corporation or sole proprietorship, can present tax planning opportunities as well as traps for the unwary. Understanding when to consult with a specialist in partnership taxation can be very important.
- Some frequently asked partnership tax questions include:
- How should a new or existing partner who performs services as a manager be compensated?
- How can self-employment and net investment income taxes be minimized?
- How should profits interests be structured?
- What is the best way to take in a new partner, transfer a partnership interest or liquidate a partnership?
- What are the consequences of incurring or paying partnership debt or changing the way the partners share in a partnership liability?
- What should be done in anticipation of a merger or acquisition?
- Is the partnership agreement structured and drafted properly, from a tax perspective?
RSM can help answer these questions and advise you generally on the tax issues presented by your business plans and strategies.
Changes to U.S. tax law likely mean more audits of private equity and real estate partnerships.
The IRS issued final regulations on the designation and authority of the partnership representative under the new partnership audit regime.
Burden-shifting rule for individuals requiring the government to prove the validity of penalties in litigation does not reach partnerships.
When considering this technique to accomplish a tax-free asset distribution, favorable IRS rulings have become more difficult to obtain.