Partnership Agreements- The treasurers' perspective (Formation)
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Partnership Agreements- The treasurers' perspective (Formation) Jerry,
I'm the treasurer of a new club and we
are in the process of writing our partnership agreement.
Specifically, as treasurer, what issues should I be most concerned
with?
Even though the IRS allows your club a great deal of
latitude in creating its partnership agreement (see IRS
Publication #541 - Partnerships), I recommend that every club create
a formal written document. Before you start it
is helpful to review the partnership agreements of other
clubs. A good example is the Partnership
Agreement of the Mutual Investment Club of Detroit , just one of
several partnership agreements available on the NAIC web site.
You'll notice that many of the items in this agreement
are very simple and straight forward.
Let's begin by looking at a few specific items that
you, as treasurer, will be particularly interested in....
First, many partnership agreements start by
defining the state in which the partnership (investment club) is
formed. At first glance this may not appear to be a very important
issue. It is, however, because this will determine under which
state's partnership laws the club will operate and the type of
state partnership tax return, if any, that the club must
file.
IRS Publication also states "if a partnership
agreement or any modification is silent on any matter, the provisions of local
law are treated as part of the agreement".
Generally, club's form in the state in which most or
all of its members reside. Online clubs or clubs who have members
widely dispersed may want to check the partnership laws and tax return filing
requirements in several states to determine which state is the most club
friendly. NAIC Regional
Chapters are often a good source of information about local partnership laws
and state filing requirements.
Tomorrow we'll look at the provisions in a partnership
agreement pertaining to member contributions and capital
accounts.
As always, feel free to send you questions, comments, and
suggestions to Trez_Talk.
Jerry
St.Louis, Missouri
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