Q: Can our business partner have his accountant amend our 2021 taxes for an LLC without our consent?
We (our LLC) formed a multi-member LLC with another partner (an individual) to renovate and sell homes in CA. In 2021 the business incurred a number of expenses renovating a home starting in Oct. The renovation was completed and sold August of 2022. Our LLC taxes were completed in 2021 for 2021. Now our business partner is claiming a number of expenses were missed for the 2.5 months and says he is going to have his accountant amend and file new taxes. He did NOT contact us directly. He only contacted the accountant we used to do the taxes for 2021.
Can he do that, have new taxes run and amended without our consent? and without even contacting us directly?
Should we just ignore his threat to the accountant?
Our accountant didn't seemed to concerned. That these "new" expenses could be claimed on 2022.
How do we "force" our business partner to provide us review of the information prior to him filing new taxes? Or do we even need to?
A:
As a member of a multi-member LLC, your business partner does not have the authority to unilaterally amend the LLC's tax return without the consent of all members. Generally, all members of an LLC must approve any changes to the LLC's tax filings. Additionally, if your LLC has a written operating agreement, it may contain specific provisions regarding how tax filings are to be handled, including the process for amending returns.
In order to force your business partner to provide you with the information he has and review the proposed amendments prior to filing, you may want to consider taking the following steps:
Review your operating agreement: Your operating agreement should contain provisions on how major decisions, such as amendments to the tax returns, should be made. Review the agreement to determine what procedures need to be followed to amend the return.
Request a meeting with your partner: Reach out to your business partner and request a meeting to discuss the proposed amendments to the tax return. This will give you an opportunity to review the information and express any concerns you may have.
Work with your accountant: Work with your accountant to review the information provided by your partner and to determine the potential financial impact of the proposed amendments.
Consider legal action: If your business partner is not willing to provide you with the information or to discuss the proposed amendments, you may want to consider legal action, such as filing a lawsuit or mediation, to resolve the dispute.
It's important to note that the specifics of your situation will determine which options are available to you. If you have any questions or concerns, it is recommended that you consult with an attorney who can provide guidance based on your specific circumstances.
Here are some relevant California code citations related to LLC taxation:
California Corporations Code Section 17704.09: Provides that a limited liability company's operating agreement may provide for the management of the company and the conduct of its business, including the filing of tax returns and payment of taxes.
California Revenue and Taxation Code Section 17941: Provides that all members of a limited liability company are jointly and severally liable for any taxes, penalties, and interest due from the LLC.
California Revenue and Taxation Code Section 19172: Provides that any member of a limited liability company may file an amended return on behalf of the LLC with the consent of all other members.
California Revenue and Taxation Code Section 18622: Provides that any person who willfully files a false tax return or fraudulently understates the tax due may be subject to civil and criminal penalties.
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