The United States Internal Revenue Service (IRS) requires every registered partnership to designate a partner – or another person – as the Partnership Representative. Persons establishing a new partnership subject to U.S. tax laws should understand the role and responsibilities of a Partnership Representative.
The Partnership Representative is the person – and the only person – to act on behalf of the partnership during a tax audit. The Partnership Representative is the US person or US entity with qualified US person ready to use his/her Social Security Number.
LLC Partnership Representative
Before the Centralized Partnership Audit regime, this person was designated as the Tax Matters Partner (TMP). As the name implies, the TMP had to be an actual partner in the endeavor.
IRC Section 6223 replaces the TMP with a Personal Representative who may or may not be a partner in the business as long as the designated person has “a substantial presence” in the United States. “Substantial presence” is required to help ensure that the Personal Representative will be available to communicate with the IRS as they deem necessary.
For this reason, the partnership should be careful to select “the person best situated to represent the partnership.” This is particularly important because any and all actions taken by the Partnership Representative during an IRS audit will be binding upon the individual partners and the partnership itself.
Should a partnership fail to designate a representative as required, the IRS may select “any person” with a substantial presence in the U.S. as the Partnership Representative.
The IRS’ determination may or may not end up being in a person who has an awareness of the partnership operations to the level at which the partnership can be confident that his or her actions, which will be binding, will ultimately be in the best interest of the business.
Reliable Partnership Representative for your business
The ACS cannot overemphasize the gravity of partnerships ensuring that they have selected and appointed a qualified Personal Representative.
We invite you to contact us at ACS for more information regarding your business partnership concerns. Our expert, multilingual staff is prepared to assist you in making certain that your partnership is IRS-compliant regarding the appointment of a Partnership Representative or any other similar matter.