RUSA
READING, UNDERSTANDING, AND STRUCTURING THE ROADMAP: LLC AND PARTNERSHIP AGREEMENTS FROM A CPA’S PERSPECTIVE

Preparation of Form 1065 and Schedules K-1 often requires the return preparer to understand the provisions of a partnership or LLC operating agreement. This workshop focuses on the provisions of an agreement or state law that can affect tax reporting and examines sample language used to achieve certain objectives. Accountants should proactively review agreements when a client is engaged, not only to identify any special provisions but also to determine missing provisions that should be brought to the attention of the principals to avoid tax issues down the road. This course provides critical information to tax practitioners who prepare partnership and LLC tax returns.

Major Topics:

  • State law: what provisions apply when the agreement does not address an issue; what state law cannot be overridden by the agreement
  • Formation: how does the business handle liabilities?
  • Capital accounts: distinguishing book from tax; the consequences of differences
  • Distributions and distributive shares: not necessarily the same
  • Liability management: recourse or nonrecourse; how the investors can change the status
  • Allocations: Flip-flop, preferring the return of capital, and reduction of investor interest and augmentation of the promoter’s interest; structuring preferred returns, guaranteed payments, and special allocations; is a qualified income offset appropriate?
  • When investors change: deemed distributions; capital account and basis adjustments relate to agreement provisions
  • Review of the roadmap – a complete partnership agreement

Learning Objectives:

  • Develop a checklist approach to review partnership and LLC agreements
  • Identify preparation planning for a partnership or LLC agreement

Designed For: CPAs who are responsible for helping structure an LLC or partnership, and CPAs who prepare tax returns for these entities
Level of Knowledge: Advanced
Prerequisite: Experience with partnership/LLC clients; an intermediate course in partnerships/LLCs
Advanced Preparation: None
Credits: 8