A Reminder That Partnership Tax Status Requires Business Purpose and Profit Sharing
Likely, either the partnership or limited liability company is the most flexible of entities now available for business- or investment-related ventures. Whether either such entity is a partnership for tax purposes is the subject of this note.
August 21, 2023 at 12:00 PM
7 minute read
Tax
Likely, either the partnership or limited liability company is the most flexible of entities now available for business- or investment-related ventures. Whether either such entity is a partnership for tax purposes is the subject of this note.
Checking the box is not all that is necessary to assure partnership status. Recognition of the entity for federal tax purposes is a prerequisite, meaning that there must be business purpose and economic substance to the entity. See 26 CFR Sections 301.7701-2 and 301.7701-3. See also IRS Form 8832 entitled Entity Classification Election.
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