Partnership Representative Operating Agreement
When it comes to forming a partnership, it is essential to have a partnership representative operating agreement. This agreement outlines the responsibilities and obligations of the partnership representative, who is responsible for representing the partnership in dealings with the IRS.
Under the Bipartisan Budget Act of 2015, the IRS now requires partnerships to appoint a partnership representative. The partnership representative has broad authority to act on behalf of the partnership in tax matters, including making decisions and resolving disputes with the IRS.
The partnership representative operating agreement should include the following:
1. Appointment of the Partnership Representative: The agreement should clearly state who will serve as the partnership representative. This person should be a responsible individual who is knowledgeable about tax matters and has the authority to act on behalf of the partnership.
2. Duties and Responsibilities of the Partnership Representative: The agreement should outline the partnership representative`s duties and responsibilities, including the authority to receive notices and communications from the IRS, make tax elections, and sign tax returns.
3. Limitations on the Partnership Representative`s Authority: The agreement should also specify any limitations on the partnership representative`s authority, such as requiring approval from the other partners before taking certain actions.
4. Removal and Replacement of the Partnership Representative: The agreement should outline the process for removing and replacing the partnership representative. This ensures that the partnership can quickly address any issues with the partnership representative.
In summary, a partnership representative operating agreement is a crucial document that provides clear guidelines for the partnership representative and ensures that the partnership can effectively navigate tax matters. As a professional, I would encourage all partnerships to create this agreement as soon as possible to protect their interests and avoid any potential misunderstandings.