Partnerships

News & Analysis as of

Practice Pointers on the Up-C Structure

In a structure commonly referred to as an “up-C,” an existing limited liability company or other partnership form (referred to here for convenience as “LLC”) undertakes a public offering through a newly formed corporation,...more

Partners Are Not Employees, Yet

Recently the IRS issued guidance in the form of temporary and proposed regulations clarifying that individuals who are partners in a partnership that itself owns a disregarded entity are not to be treated as employees of the...more

Law à la Mode: Whose Name is it Anyway?

Designing under your own name is a natural, even intuitive choice for many designers and is an established practice in the fashion industry. ...more

Partnership Audit Changes and Their Effect on Operating Agreements

On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015. The Bipartisan Budget Act of 2015 contained several significant changes to the procedural rules for federal income tax audits and the...more

Be Careful in Granting Profits Interests to Your Key Employees; New IRS Regulations Suggest the IRS is Keen on Form K-1 Filing

On May 5, 2016, the Department of Treasury and the Internal Revenue Service published final and temporary regulations amending Treasury Regulations §301.7701-2 under Section 7701 of the Internal Revenue Code of 1986, as...more

LLCs May Be Right Unless They’re Wrong

As I’ve posted before, I usually advise non-US companies to form a corporation when expanding to the United States. Every now and then, I get some pushback because the non-US company has heard about ‘limited liability...more

New Partnership Audit Rules Will Require Amendment of All Partnership Agreements by 2018

On November 2, 2015, Congress passed the Bipartisan Budget Act of 2015, Section 1101 of which repeals the long-standing current rules for IRS audits of partnership entities and replaces those rules with a new centralized...more

Cheat guide to setting up shop in the United Arab Emirates

In the last decade, the UAE has become an increasingly popular destination to do business and opportunities abound for many. But alongside the hard work of setting up a business in the UAE, there are a number of legal...more

IRS Shuts Down Work Around for Treating a Partner as an Employee

The IRS has long taken the position that a partner cannot also be an employee of the partnership. The prohibition also applies to persons that hold equity in a limited liability company ("LLC") that is taxed as a partnership...more

SEC Approves PCAOB Rule Requiring Audit Partners to be Identified

The SEC has approved a proposed PCAOB rule requiring identification of audit engagement partners and certain other audit participants....more

Appellate Court Notes

Supreme Court Advance Release Opinions: SC19493 - Standard Oil of Connecticut, Inc. v. Administrator, Unemployment Compensation Act - SC19493 Dissent - Standard Oil of Connecticut, Inc. v. Administrator,...more

New Guidance on Bad Boy Guarantees

The IRS Office of Chief Counsel recently released a memorandum (#AM2016-001) addressing the proper tax treatment of nonrecourse carve-outs (or bad boy guarantees) in the partnership context. According to the memorandum, such...more

Partnerships Must Respond to New Audit Rules

The recently-enacted Bipartisan Budget Act of 2015 includes a far-reaching overhaul of the rules applicable to IRS partnership audits and tax adjustments. This will be significant for partnerships and limited liability...more

Obligation to Perform Work and Incur Costs Under Construction Contract is a Section 752 Liability

In a recently issued Private Letter Ruling (PLR 201608001), the IRS determined that a taxpayer-partnership’s obligation to perform work and incur costs under a long-term construction contract constituted a partnership...more

Changes to IRS Partnership and LLC Audit Rules

Recent history has seen a proliferation of health care organizations—including tax-exempt organizations, for-profit companies, and physician practice groups—that have joined together to take advantage of different synergies...more

IRS Withdraws Controversial Pronouncement on “Bad Boy” Guarantees

In a client advisory dated February 25, 2016, we described a legal memorandum released by the Office of Chief Counsel of the Internal Revenue Service (the “Memorandum”) which took the position that a typical “carve-out” or...more

What Law Governs A Foreign General Partnership?

The California Uniform Partnership Act of 1994 defines a “partnership” to mean “an association of two or more persons to carry on as coowners a business for profit formed under [Cal. Corp. Code] Section 16202, predecessor...more

Appellate Court Notes

Supreme Court Advance Release Opinions: SC19408 - NPC Offices, LLC v. Kowaleski - In this case, the Supreme Court reversed the Appellate Court. The Appellate Court had agreed with the Trial Court that a driveway...more

New Partnership Tax Audit Rules

The Bipartisan Budget Act of 2015 establishes new rules (the “New Partnership Audit Rules”) for the conduct of federal income tax audits of partnerships and the assessment and collection of income taxes resulting from such...more

A Reminder That Modern Large Partnerships are Still Partnerships

Large law and accounting firms ostensibly bear little resemblance to traditional, small-scale partnerships. Nevertheless, in the recent Ontario Superior Court decision in Tim Ludwig PC v BDO Canada LLP, 2016 ONSC 2225, a...more

Potential Refund Opportunity: Recent Michigan Business Tax Ruling Clarifies the Meaning of ‘Indirect’ Ownership

The Michigan Court of Appeals has held that Treasury cannot use the constructive ownership rules of IRC § 318 to determine whether a group of entities meets the threshold for mandatory combined reporting under the Business...more

Sun Capital Partners on Remand: District Court Rules that Related Funds Formed a Partnership-in-Fact Engaged in a Trade or...

In a recent decision with important implications for private equity funds and their sponsors (Sun Capital Partners v. New England Teamsters), the U.S. District Court for the District of Massachusetts concluded that two...more

Private Equity Funds Liable for Withdrawal Liability of Portfolio Company

What you need to know: On March 28, 2016, the US District Court for the District of Massachusetts held, on remand from the First Circuit, that two related private equity funds were jointly and severally liable for...more

IRS Sets Short Fuse for Comments, Guidance on New Partnership Audit Rules

As if it wasn’t going to be busy already, the Internal Revenue Service (“IRS”) has set Tax Day, April 15, 2016, as the due date for comments on significant new partnership audit rules. This new law, which was enacted as part...more

Partnership Audits of Private Equity Firms on the Rise

There has been buzz in the tax and private equity communities about the rise in audits of private equity firms by the Internal Revenue Service (“IRS”). This has been fueled by the restructuring of the IRS’ Large Business &...more

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