Partnership tax allocations. I have a partnership and invest and hold real estate. I established utilities on a rental property

Asked almost 2 years ago - San Jose, CA

under my personal name. The property is held on title under the LLC. We are preparing the tax return and are deducting the utilities on the 1065 partnership / LLC return; the LLC paid the utilities from it's bank account. Again, the utilities are in my name, thats how the utility company wanted it. Must the utilities be in the name of the LLC to avoid deductibility issue with IRS? Or is it logical and accepted that I, one of the managers, placed utilities under my name for operational reasons?

Attorney answers (3)

  1. John Noah Kitta

    Contributor Level 19


    Lawyers agree


    Answered . I really don't see a problem with placing the utilities in your name. It appears very obvious you are acting as an agent for the LLC. I can't imagine this would come under any serious tax inquiry. If the records and books for the LLC back up your contentions, then I really think you are pretty bullet proof in this regard.

    I hope this is helpful.

    John N. Kitta

    If you have found this information helpful, please let the attorney know by marking best answer. Thank you.... more
  2. Timothy John Broussard

    Contributor Level 12


    Lawyers agree


    Answered . We must qualify this answer by first, recommending calling your CPA. But, typically LLC paid the utilities, the LLC gets the deduction. Now, from a legal standpoint. You might want to avoid putting ANYTHING in your personal name without qualifying it as you are the Agent for the LLC, or Managing Officer. This will avoid any problems later for non-payment by the LLC. We lawyers evaluate from a downfall perspective. So, if the LLC fails to satisfy the debt, you don't want to be personally liable. The Utilities is protecting themselves by putting a name on it. Try to avoid with other venders unless you have to issue a personal guarantee. At that point, you need to sit down with any other partners of the business and figure out who is going to take that responsibility, or if all of you will.

    Tim Broussard
    Kring & Chung, LLC

    This email does not create an Attorney-Client relationship.
  3. Bruce Givner

    Contributor Level 19


    Lawyer agrees

    Answered . It is not a great idea to have the utilities in your name if the property is in the name of the partnership. However, if that was required by the utility, try to have some written evidence of that requirement in your files. In balance, no, it should not be a problem that the utilities are in your name and the LLC pays the bill.

Related Topics

Small business LLCs

An LLC (limited liability company) is a business entity that has elements of both a corporation and a partnership (or sole proprietorship).

Residential property

Residential property is real estate that has been developed or zoned to be used for living, such as single family houses, apartments or mobile home parks.

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