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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7315
Experience:  15years with H & R Block. Divisional leader, Instructor
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Partner committed fraud

Resolved Question:

If I was a 30% member in an LLC, and had no signing privaledges on any accounts, but was the only member listed on the state charter LLC and my partner failed to pay sales and use tax along with other frauds, am I liable, and what are my options. I have forced him to sign over 85% for super majority, but I'm not sure how far out the taxes are? It is an automobile dealership. The new president I hired has extensive experience and has identified the issues that need to be addressed. In addition, he has submitted a detailed Plan of action to turn the operation around, and has opened new checking accounts to which I do have access, diverted all future act payments and debits to the new accounts, and submitted a budget totaling $300k low end, and $400k high end to turn the company around along with pro forma and projections trended out in best, XXXXX XXXXX most likely case scenarios, break-even analysis, and an exit strategy if I need one.


 


My name is XXXXX XXXXX the EIN or the Sales and Use certificate.  

Submitted: 1 year ago.
Category: Tax
Expert:  Lindie-mod replied 1 year ago.
Hi, I'm a moderator for this topic. I've been working hard to find a Professional to assist you right away, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you. Thank you!
Expert:  Robin D. replied 1 year ago.

Hello and thank you for using Just Answer,

Your situation is very unfortunate and not uncommon. I think the main reason you have had to wait for a response is because you may not like what a tax expert has to tell you.

Your personal liability will depend on the actual LLC. If a partnership, each partner is responsible for the acts of other partners when they act in the name of the business. That is, business, income and sales taxes are the responsibility of every partner.

If your partnership had changed to a single member LLC then you would need to get a new EIN. If the same people are still in the LLC then a new EIN is not needed.

Tennessee sales tax penalties will be based on the total owed but not more than 25% and minimum 15% for not filing. If the returns were filed then any underreported amount will be subject to interest.

The fact that your name was not on the EIN or the Sales Tax, would really only matter if the original LLC had dissolved and the other person was not in the picture at all. This is only good for the future though as you move forward. The past debt, especially for sales tax which is under the Trust Fund obligations would make the liability still open.

The steps you have taken thus far with the new management and the plans should protect you in the future. May I suggest that you ensure a separate account is set up for the sales tax collected separate from the business account all together.

I truly wish I could offer a different answer to you. The state will work with you and you do have options to recoup the money for the individual if it was used for their person gain and not used for business purposes instead of being remitted. Of course that would require civil legal action separate from tax.

Best wishes to you and thank you for your patience.

Customer: replied 1 year ago.

And the above applies even if I were a silent partner that lived 190 miles away and found out only by virtue of one of my creditors telling me I was out of trust?

Expert:  Robin D. replied 1 year ago.

Hello,

Yes, unfortunately so. A partnership entity is different than corporation. If that partner is still in the mix you are still the same partnership even if the % changed. If you bought them out then you can apply for a new entity and EIN. Also register with state as different but your liability will be tied to theirs under the original.

You will need to work closely with a tax adviser to protect your personal liability as much as possible. Their assets should be hit first but if the state cannot get it from them they will look to you.

 

Customer: replied 1 year ago.

It was explained to me that if they have accepted liability, and they have under the forfeiture of shares clause in the operating agreement, that if I wIt not handling operations, not on bank accounts, and was not aware of the state of the business until the 18th of this past month when I took over, and could prove as much, then I wouldn't be liable, I'd just have to press the fraud charges, as I'm doing, and open the accounts for review which I'm prepared to do, and the responsible parties will be established and I'd be held harmless as a victim of fraud. The lines of credit are civil... I guaranteed them and have to eat it, but I still could t tell you how it's run, I'm not in the. business. I hired a corporate raider to fix the issues. Im getting financials when I wasn't getting the before, and I know where I am on all but taxes

Expert:  Robin D. replied 1 year ago.
The civil matters and the fraud are different fro the tax obligations. I already told you how the tax responsibility is looked at for partners. You would have recourse under fraud but I cannot advise that the state would hold you harmless for the sales tax. The audit will determine the correct sale tax owed and then you could apply to the state for penalty abatement and a possible compromise for the total owed but you would not be absolved for liability.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7315
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 7 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
What recourse do I have with revenue on conversations that are disclosed as recorded, and they are, where the dept of revenue tells me if I can prove I wasn't in the know that I would have no liability, gives their full name and tittle along with contact number?
Expert:  Robin D. replied 1 year ago.

Save them till the end and all state tax is assessed. At that time if the state presents the partnership with the bill the partnership will need to pay, if they determine that by your relationship (which the only remaining item I can think of would be how much monetary gain you received from the partnership during the time the sales tax was not remitted) you could be liable.

I cannot give you a guarantee one way or the other.

Customer: replied 1 year ago.
I guess that's where we're missing each other. I've only paid in. They requested more capital, I sent it. I haven't received a dime, nor financials nor anything else until I took over. Since I've taken over, I've spent an additional 75k fixing my lines of credit with an additional 100k going in this week. The raider is good... He's turned around a few projects for me and comes from the automotive industry, otherwise I'd be looking for an exit strategy. What I was looking for from just answers was someone asking specific questions pretaining to the situation, and after information gathering, forming an opinion based on collective experience in working with tax issues, such as. Are you member managed? Who's the person of record that has been filing ( if it applies), any applicable sales tax. Was there a separate sales tax account, who was on it. This is the definition of responsible party/parties? What was your role and activity in the company. In what capacity did you work in the operations, governance, decisions, and voting..... Whereas you were associated only by guaranteeing lines and investing money, and setting up the charter, and Noting it is clear and present beyond any reasonable or doubt at all, and whereas the managing member has acknowledged not satisfying the debt service and breach of fiduciary responsibility... Therefore your options are ???????? The answer and explanation for the answer seems rather canned. I paid for specificity, and I feel I'm getting a broad rule of thumb answer instead of a, normally your liable... However based on the info you've provided you may have an out, here is what I would do... Not saying its gonna work, but it would be the first step to being made whole. At this point I don't feel the question has been adequately answered! Do you care to be more specific to my situation.
It's not my intent to be difficult, but the last question I asked about privacy on the net, wasn't answered here. The answer was detailed and the guy also gave me this: the case, the names ? V ? And the link to read the precedent supportive of his answer.
Expert:  Robin D. replied 1 year ago.
no answer was meant to be read canned. You are not required to rate. I will Opt Out and I respectfully XXXXX XXXXX wait to receive assistance form another expert. At that time you can rate their assistance.
Customer: replied 1 year ago.

Done... Thx for trying.

Expert:  Robin D. replied 1 year ago.

Someone will respond to you if you can be patient. Your situation is complicated and it took awhile for me to address your initial question.

Another expert will need to rad through all we have discussed and see if I missed something that may help you.

Customer: replied 1 year ago.

I was under the impression that you didn't want me to rate you?

Expert:  Anne replied 1 year ago.
Hi

Thank you for using justanswer/Pearl.

If you were, as you said, a silent partner that lived 190 miles away, and you did not actively participate in the business itself, and your only real connection with the partnership was that you contributed cash, then you are considered a "Limited Partner", and as such, any debts of the partnership will expose your personal assets to liability unless you're a limited partner, in which case your liability is limited to the money you've invested.

At this point, you really need to find an Enrolled Agent, CPA, or even a tax attorney to help you unravel all of this. There's only so much we can do in this forum.

You really need someone that can be "hands on" with all of the paperwork/audit letters, etc from the IRS.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.


Customer: replied 1 year ago.

Here's issue, I'm assuming the rating pays for the answer. The question, in my opinion, wasn't answered. Kinda like; do you go to jail for shooting someone, to which the one size fits all answer is yes. If you go into specifics and it's self defense, then there is a loophole. I was looking for plausible alternatives to the question of absolute liability. I assumed I was liable, I came to this site to find out if exceptions are made and under what circumstances. I the interest of ending the back and fourth, I'll fill out the survey completely satisfied as I am completely satisfied that I am no further informed than I was before and you can get paid.


Good day

Expert:  Robin D. replied 1 year ago.

I sincerely XXXXX XXXXX had not rated at all. You are not required to pay if you are not satisfied. I can and would be happy to have Customer Service refund your money. I and I am sure the other expert would rather you be satisfied, that is why I Opted Out so another expert could assist you. As you can see we did have a disagreement.

Please let me know what you want me to send the payment to the expert that provided the last answer.

Customer: replied 1 year ago.

No ma'am, I find that in life the lessons learned, are the ones you pay for. That being said, this is the most inexpensive lesson I've ever had by far... When you need solid advice on something like this, it ain't in a chat forum. Pull out your check book, pay the retainer, and talk to someone that gets paid an obscene amount of money because they have done this a million times and chances are, ways way to the better there be; they will have taken it before. All law, tax law included, isn't about the truth, if I were, we wouldn't be talking. It's abodustheap suppression of the truth and the presentation of plausible alternatives to factual events. And as such, the truth is waisted on my situation, I need someone to take the truth of this matter, and offer me

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