Form 541 - Partnerships - Department Of Treasury Internal Revenue Service

Many rules in this publication do not

537

Installment Sales

Limited liability company. A limited liabil

apply to partnerships that file Form

ity company (LLC) is an entity formed under

538

Accounting Periods and Methods

1065-B, U.S. Return of Income for

state law by filing articles of organization as an

CAUTION

544

Sales and Other Dispositions of

Electing Large Partnerships. For the rules that

LLC. Unlike a partnership, none of the members

Assets

apply to these partnerships, see the instructions

of an LLC are personally liable for its debts. An

for Form 1065-B. However, the partners of

LLC may be classified for federal income tax

551

Basis of Assets

purposes as either a partnership, a corporation,

electing large partnerships can use the rules in

925

Passive Activity and AtRisk Rules

or an entity disregarded as an entity separate

this publication except as otherwise noted.

from its owner by applying the rules in Regula

946

How To Depreciate Property

tions section 301.77013. See Form 8832 and

Withholding on foreign partner or firm. If a

See

How To Get Tax Help

near the end of this

section 301.77013 of the regulations for more

partnership acquires a U.S. real property inter

publication for information about getting publi

details.

est from a foreign person or firm, the partner

cations and forms.

ship may have to withhold tax on the amount it

A domestic LLC with at least two

pays for the property (including cash, the fair

members that does not file Form 8832

TIP

Forming a Partnership

market value of other property, and any as

is classified as a partnership for fed-

sumed liability). If a partnership has income ef

eral income tax purposes.

fectively connected with a trade or business in

The following sections contain general informa

the United States, it must withhold on the in

Organizations formed before 1997. An or

tion about partnerships.

come allocable to its foreign partners. A part

ganization formed before 1997 and classified

nership may have to withhold tax on a foreign

as a partnership under the old rules will gener

Organizations Classified as

partner's distributive share of fixed or determi

ally continue to be classified as a partnership as

nable income not effectively connected with a

Partnerships

long as the organization has at least two mem

U.S. trade or business. A partnership that fails

bers and does not elect to be classified as a

to withhold may be held liable for the tax, appli

An unincorporated organization with two or

corporation by filing Form 8832.

cable penalties, and interest.

more members is generally classified as a part

For more information, see Publication 515,

nership for federal tax purposes if its members

Community property. Spouses who own a

Withholding of Tax on Nonresident Aliens and

carry on a trade, business, financial operation,

qualified entity (defined later) can choose to

Foreign Entities.

or venture and divide its profits. However, a

classify the entity as a partnership for federal

joint undertaking merely to share expenses is

tax purposes by filing the appropriate partner

Comments and suggestions. We welcome

not a partnership. For example, coownership of

ship tax returns. They can choose to classify

your comments about this publication and your

property maintained and rented or leased is not

the entity as a sole proprietorship by filing a

suggestions for future editions.

a partnership unless the coowners provide

Schedule C (Form 1040) listing one spouse as

You can write to:

services to the tenants.

the sole proprietor. A change in reporting posi

tion will be treated for federal tax purposes as a

The rules you must use to determine

Internal Revenue Service

conversion of the entity.

whether an organization is classified as a part

Tax Forms and Publications

A qualified entity is a business entity that

nership changed for organizations formed after

SE:W:CAR:MP:TFP

meets all the following requirements.

1996.

1111 Constitution Ave. NW, IR6526

The business entity is wholly owned by

Washington, DC 20224

spouses as community property under the

Organizations formed after 1996. An organi

laws of a state, a foreign country, or a pos

zation formed after 1996 is classified as a part

We respond to many letters by telephone.

session of the United States.

nership for federal tax purposes if it has two or

Therefore, it would be helpful if you would in

No person other than one or both spouses

more members and it is none of the following.

clude your daytime phone number, including

would be considered an owner for federal

An organization formed under a federal or

the area code, in your correspondence.

tax purposes.

state law that refers to it as incorporated or

You

can

send

comments

from

The business entity is not treated as a cor

as a corporation, body corporate, or body

Click on “More Infor

poration.

politic.

mation” and then on “Comment on Tax Forms

An organization formed under a state law

For more information about community

and Publications.”

that refers to it as a jointstock company or

property, see Publication 555, Community

Although we cannot respond individually to

jointstock association.

Property. Publication 555 discusses the com

each comment received, we do appreciate your

An insurance company.

munity property laws of Arizona, California,

feedback and will consider your comments as

Idaho, Louisiana, Nevada, New Mexico, Texas,

Certain banks.

we revise our tax products.

Washington, and Wisconsin.

An organization wholly owned by a state,

Tax questions. If you have a tax question,

local, or foreign government.

Family Partnership

check the information available at IRS.gov or

An organization specifically required to be

call 18008294933. We cannot answer tax

taxed as a corporation by the Internal Rev

questions at the address listed above.

enue Code (for example, certain publicly

Members of a family can be partners. However,

traded partnerships).

family members (or any other person) will be

Ordering forms and publications. Visit

Certain foreign organizations identified in

recognized as partners only if one of the follow

to download forms and

section 301.77012(b)(8) of the regula

ing requirements is met.

publications, call 18008293676, or write to

tions.

If capital is a material incomeproducing

one of the addresses shown under How To Get

A taxexempt organization.

factor, they acquired their capital interest in

Tax Help in the back of this publication.

a bona fide transaction (even if by gift or

A real estate investment trust.

purchase from another family member),

Useful Items

An organization classified as a trust under

actually own the partnership interest, and

section 301.77014 of the regulations or

You may want to see:

actually control the interest.

otherwise subject to special treatment un

If capital is not a material incomeproduc

der the Internal Revenue Code.

Publication

ing factor, they joined together in good

Any other organization that elects to be

faith to conduct a business. They agreed

classified as a corporation by filing Form

334

Tax Guide for Small Business

that contributions of each entitle them to a

8832.

share in the profits, and some capital or

505

Tax Withholding and Estimated Tax

For more information, see the instructions for

service has been (or is) provided by each

535

Business Expenses

Form 8832.

partner.

Page 2

Publication 541 (December 2013)

Form 541 - Partnerships - Department Of Treasury Internal Revenue Service - 2013 Page 2

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