I was a non-manager member of a two person llc and was defrauded by manager. the operating agreement had it as a single manager member llc -the articles of incorporated filed had it as managed by one member - the other party was manager -- i was only a member - but -i was listed in operating agreement as the tax matters member-
is this a violation of irs tax law because only manager members can be tax matters members? as tax matters member is he same as tax matters partner. if it is in violation of irs tax law does that mean the operating agreement itself would be invalid?
the partnership is subject to the rules for consolidated audit proceedings in sections 6221 through 6234, the partnership can designate a partner as the TMP for the tax year for which the return is filed by completing the Designation of Tax Matters Partner section on page 3 of Form 1065. The designated TMP must be (or have been) a general partner during the tax year and, in most cases, also must be a U.S. person. For details, see Regulations section 301.6231(a)(7)-1.
For a limited liability company (LLC), only a member manager of the LLC is treated as a general partner. A member manager is any owner of an interest in the LLC who, alone or together with others, has the continuing exclusive authority to make the management decisions necessary to conduct the business for which the LLC was formed. If there are no elected or designated member managers, each owner is treated as a member manager. For details, see Regulations section 301.6231(a)(7)-2.
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Do you have a question or are you writing a treatise on partnership tax law? If you believe the managing member has defrauded you, consult with your own accountant or tax advisor regarding how to report your financial activity as a member of the LLC, based on the specific circumstances of your situation. If you focus on the taxable activity which was contained within the LLC and less on complex rules governing how to appoint a tax matters partner, third parties will have a better idea of how to help you.
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