Can arrears of Income-Tax be recovered from a Partner's personal accounts with the Banks if the Firm who is an asset rich company but is unable to pay tax because of the shortage of funds?
2007-04-01 13:24:03 · 4 answers · asked by Justanian 1 in Business & Finance ➔ Taxes ➔ United States
Can the Income-Tax people touch or put in lien a partners' personal property even before they have attached or auctioned off the firms property? Thats the real question.
2007-04-01 13:49:16 · update #1
Partnerships (the old version, not LLPs) have a special legal status that makes them suck really bad:
"joint and severally liable"
That's a special legal status. It means that all partners are responsible for the debts and behavior of all the partners.
This has lead to a special legal strategy for plaintiffs. Whenever a business partnership commits a tort, the plaintiff will find out who the richest partner is and sue them, even if it's clear that the richest partner had no knowledge or complicity.
And they win.
They win because of that magic phrase. The richest partner is jointly liable as well as individually liable for anything that happens in the company. So is the poorest partner, for that matter, but no one cares about him because he's not a "deep pocket".
2007-04-01 13:39:31 · answer #1 · answered by Anonymous · 0⤊ 0⤋
A partnership is a pass-through entity. The liabilities of the partnership and the income pass directly to all partners.
In a corporation, the shareholders are generally insulated from liability (except for LLCs and S-Corps which are pass-through entities just like a partnership is). Even so, the corporate officers as well as the employees responsible for taxes (bookkeepers, payroll managers, accountants, etc.) can be held personally liable for unpaid taxes.
2007-04-01 16:20:47 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
I believe ....I could be wrong...but I do believe that a partner is responsible for arrears and taxes should the company fail to pay. I wish I could get more info for you right now but I'm not at work. I work in the 10th most reputable CPA firm in the Nation.
But I believe it's also different if it's a LLP...as opposed to other parternships.
2007-04-01 13:31:37 · answer #3 · answered by mailjunkie123 3 · 0⤊ 0⤋
YES! The IRS will put a lein on the assets plus penality and interest.
2007-04-01 13:29:49 · answer #4 · answered by Anonymous · 0⤊ 0⤋