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Following is a list of year-end administrative issues for Texas limited partnerships and limited liability companies (“LP/LLC”):
- Ensure that the LP/LLC’s activities, transactions, capital infusions (capital contributions or loan proceeds), and distributions are accurately reflected in the entity’s records;
- Avoid causing the LP/LLC to make any distributions not in compliance with the terms of its LP/LLC agreement or applicable law; for example, an LP/LLC should not make disproportionate distributions to any owner (unless the LP/LLC agreement provides for such distributions);
- Do not commingle LP/LLC assets with personal assets (e.g., using the LP/LLC’s checking account as your personal account) and do not use LP/LLC assets to pay for personal expenses;
- Keep books and records sufficient to comply with income tax, Texas margin tax, and other tax reporting obligations, and to accurately determine each partner/member’s capital account;
- Always retain sufficient cash and other liquid assets for your living expenses outside the entity;
- Prepare and file any Texas margin tax return and pay any tax (as applicable) and consult with the entity’s accountant to confirm the due date of such return;
- Prepare and file necessary federal, state, and local income tax returns, and complete other reporting requirements (e.g., Schedule K-1) and consult with the entity’s accountant to confirm the due date of any such return;
- File necessary forms for any employees, such as Forms W-2 and W-3, Forms 940 or 940 EZ - Employer’s Annual Unemployment (FUTA) Tax Return, and Form 941 - Employer’s Quarterly Federal Tax Return, as applicable;
- Conduct regular meetings of owners and maintain minutes of meetings (or execute unanimous consents in lieu of such meetings);
- Review the LP/LLC agreement to ensure compliance with its management provisions (e.g., does the LP/LLC requirement necessitate additional approvals with respect to “major decisions” or other key decisions?);
- Review salaries and compensation of managers, officers, or employees, as applicable, to ensure compensation is reasonable and in compliance with any approval requirements in the LP/LLC agreement;
- Consider and review (i) indemnification provisions in LP/LLC agreement and (ii) insurance policies to determine whether there is adequate coverage; and
- Review and maintain records relating to the business, affairs, and financial condition of the entity, including:
- state filings (for example, periodic reports with the Texas Secretary of State);
- federal, state, and local income tax returns;
- current list of the name and address of each partner or member (including classes or groups of interests) and percentage or other interest owned by each partner or member; and
- executed copies of any powers of attorney or documents that establish a class or group of interests.
If you have any questions, please feel free to contact one of the attorneys listed below. You may also view the alert in the PDF below.
To ensure compliance with requirements imposed by U.S. Treasury Regulations, Haynes and Boone, LLP informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
*Board Certified – Estate Planning and Probate Law and Tax Law by the Texas Board of Legal Specialization.