Category: Partnerships & LLCs
Subject: LLC
Title: Tax Matters Partner of LLC
IRC Sections: 6231
Filename: 1223.html
Date Produced: 04/95

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Facts
Taxpayer is an LLC. 60% of the LLC's capital was invested by members and 40% by manager/members.

Issue
One of the non-manager members wants to be the tax matters partner (TMP). Is that possible?

Answer
The authoritative tax literature provides no definitive answer. I think there is a logical answer that can be derived based on the specifics of the state LLC statute and/or the terms of the taxpayer's operating agreement.

Discussion
As you know, the limited liability company area is a fairly new, relatively untested area. To the best of my knowledge, the issue of who can be the TMP of an LLC has not been addressed specifically.

In the partnership area, Section 6231 provides that only a general partner can be the TMP. In other words, in a partnership with both general and limited partners, the limited partners are excluded from designation as TMP. Why? The sole purpose of TMP designation is to allow one partner to bind the partnership in various tax matters. I am not an attorney, but as I understand it, only a general partner can legally bind the partnership on any matter.

It seems to me that the logical answer to this question lies in whether the non-manager member can legally bind the LLC in this case. This question must be answered by a competent attorney. In essence, taking into consideration the state LLC statute in conjunction with whatever the taxpayer's operating agreement says, can a non-member manager bind the LLC in this case? If the answer is yes, it seems logical that the non-member manager could serve as the TMP. Otherwise, I think the IRS would not allow the designation.

Obviously, the IRS has the power to issue rules on this matter and could very easily decide for policy and administrative reasons that my logical answer is not the position they want to take. Short of that, however, it seems to me that if the non-member manager can legally bind the LLC, the taxpayer is justified in making the desired TMP designation.