IRS and Partner

[DTS]

I hope this question is not too dumb.

A client called today and told me he wanted to bring a partner into his LLC, but this fellow is having serious issues paying off personal past due balances and the notices have started to roll in and my fellow is worried about adding him at this time because of this.

Will this possibly affect the other partner (my client) or the partnership in any way, such as a garnishment of guaranteed payments through the partnership, etc? Seems this would not affect the partnership, but I've never run across this before and don't know.

Any help would be most welcome.

Thank you.

[Lion]

If I were the original owner, I'd be reluctant to bring in a partner who has legal difficulties. I'd be concerned about both the appearance to my clients and vendors as well as the time and paperwork that could result. Wouldn't his creditors, especially the IRS, be able to get a claim against his GP and even his percentage of gain and capital of the partnership? If he really doesn't want to lose this person, maybe hiring him as an employee or IC would be safer to protect his LLC. But, yes as you say, you may end up dealing with a claim against his wages or IC income. If it were me, I'd wait until he settles his current issues to my satisfaction.

[ChEAr$]

Didn't the OP say that this is an LLC? What then is all this about partners and GP?

Best to ask legal counsel but I think his answer will be that the LLC would not be responsible for a MEMBER's
personal debts.

If push came to shove of course IRS could put a lien on a member's interest in an LLC.

[DTS]

Didn't the OP say that this is an LLC? What then is all this about partners and GP?

Best to ask legal counsel but I think his answer will be that the LLC would not be responsible for a MEMBER's
personal debts.

If push came to shove of course IRS could put a lien on a member's interest in an LLC.

Sorry about the incorrect wording. I posted late and very tired. You are absolutely correct, member and LLC, not partner and partnership.

Thank you both for your thoughts. I will pass them on.

[S T]

Same replies as above - guess I didn't catch the LLC - Member issue, but then an LLC - member can elect partnership

Any which way - I would be hesitant to bring in another "Member/Partner" if the had any liability issue that might overlay onto the the LLC or to deal with it at a Member/Partner level i.e, in guaranteed payments.

Your T/P that formed the LLC should be made aware of that

Option, bring this other "person" on board as and IC or an employee on Payroll with Commission- but then your T/P needs to be aware of the 1099 reporting issue for that as well as the fact that will probably receive a notice from IRS for the Backup witholding or levy notice.

The forms I received on some of these issues were from the IRS in 2011/2012 - form 668-W - Notice of Levy on Wages,Salary and other Income, then the T/p has to respond and also comply if appropriate.

Your post did not state what type of "Notices" so that could relate to several issues, as in IRS Notice, State Notices, Credit Card Notices, Loan Notices, etc.

Does not appear to be favorable to your T/P regardless of the Entity Status and as Lion points out - what if your T/P needs info to supply to his Banker./Financial Instituion.

Sandy

[DTS]

Spoke with the member and we went back over this situation a second time. He's not bringing him on until he's cleared this up with the IRS (and state most likely).