Only Member-Managers of LLC Qualify to Be Tax Matters Partner

[Third Party Communication: * * *

This email responds to your request for advice dated 6/9/2015. In response to your questions:

According to the LLC agreement, * * * is a CA LLC. Under CA law, if the articles of organization of an LLC indicate that the LLC is a manager-managed LLC, then no member acting solely in the capacity as a member is an agent of the LLC for purposes of its business or affairs and may not bind the LLC. Cal. Corp. Code § 17703.01. If the articles of organization do not indicate that the LLC is a manager-managed LLC, then every member is an agent of the LLC. Id . Therefore, under CA law all members are managers, but only if the LLC agreement does not provide otherwise.

In its articles of organization, * * * checked the box to indicate that it is to be managed by one manager. On * * * of the LLC agreement, management of * * * is vested in * * *. Therefore, * * * is a manager-managed LLC under CA law and only managers have, under CA law, the authority to make management decisions necessary to conduct the business of the LLC. Under Treas. Reg. § 301.6231(a)(7)-2(b)(3) in order for a person to be a "member-manager" and, thus, qualified to be the TMP of an LLC, the person must be a "member of an LLC who, alone or together with others, is vested with the continuing exclusive authority to make the management decisions necessary to conduct the business for which the organization was formed." In this case, * * * has vested management of itself in * * *, who is also a member of * * *. As * * * is a member of * * *, and the only manager, he is the only "member-manager" under Treas. Reg. § 301.6231(a)(7)-2 and, thus, is the only person qualified to be the TMP of * * *.

Because * * * is the only person qualified to be the TMP of * * *, * * * and are not eligible to be the TMP of * * *. Thus, a statute extension signed by would not extend the period to assess other partners of * * * unless * * * was acting for the TMP or a person authorized by the partnership in writing to extend the period for the other partners. I.R.C. § 6229(b)(1)(B). We have no indication that this is the case. However, you have indicated that has signed Forms 872 to extend his personal period for assessment. Therefore, * * *'s period of limitations for assessment is open and the IRS may assess tax attributable to any adjustments to * * *'s partnership items. See I.R.C. § 6229(b)(1)(A), (3).

Please let me know if you have any questions, or if we can be of further assistance.