For purposes of self-employment taxes, many members of LLCs have treated themselves as
limited partners and have therefore reported that their distributive share of income was not subject to self-employment tax under Sec.
The FLP should preserve the general partner's fiduciary duties toward the
limited partners.
Of course, the directors can be made up of the same people (or some of them) who are
limited partners, thereby placing some control over the limited partnership business back into the hands of the
limited partners; but, as you can see, things begin to get complicated, especially where issues of limited liability arise.
The ownership of the building consisted of ERIM (general partner), Tishman (General Partner and Leasing/-Management Agent), which eventually relinquished its share of the building to ERIM, and 27
limited partners syndicated by Bear Stearns & Co.
The Schedule K-1s were distributed to each
limited partner and the
limited partners used the numbers on it as deductions in filling out their individual returns.
As a consequence, the Tax Court found that A "essentially stood on all sides of the partnership's formation and approved the provisions of the KPLP agreement without negotiation or input from the
limited partners.
The CPA should have verified that the information, or evidence of wrongdoing was correct, and insisted that the general partners notify the
limited partners of the excess management fees.
1402(a)-2, which effectively subjected certain
limited partners (primarily LLC members) to SE taxes, Congress placed a moratorium on their finalization.
In addition,
limited partners have limited rights in management whereas LLCs are designed to permit all members to be active in management.
1402(a)-2(h)(5) and -(2)(h)(6)(iii) provide that if substantially all of a partnership's activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science or consulting, then all individuals who provided services as part of the trade or business will not he considered
limited partners.
