In a recent letter, the IRS Office of Chief Counsel reviewed a limited liability company document and opined on the appropriate signatures required to appoint someone to act as a power of attorney for the company.
The limited liability company (LLC) described in the letter (CCA 201316018) is taxed as a partnership for federal tax purposes. Although partners generally have the authority to bind partnerships, the question of who has the authority to bind an LLC is more complex.
Under the facts presented in the letter, the chief counsel concluded that the signature of an LLC’s chief financial officer on Form 2848, “Power of Attorney and Declaration of Representative,” did not meet the applicable regulation requirements.
The chief counsel noted that the regulations generally say all partners must sign a power of attorney for a partnership, or if signed in the name of the partnership, the partner or partners duly authorized to act for the partnership must sign. However, the regulations do not indicate who must sign a power of attorney for an LLC.
A person signing a power of attorney must have the power to bind an entity on behalf of which the person is signing. The chief counsel noted that state law determines who has the authority to act on behalf of an LLC.
The chief counsel further noted that the tax matters partner acts as a liaison between the LLC members and the IRS in a TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) proceeding, which is an audit of the partners or LLC members with respect to partnership items. The tax matters partner has the authority to bind the LLC members with respect to extensions of the statute of limitations on assessment.
In the facts addressed in the letter, the chief counsel noted that the president and manager of the LLC was also the tax matters partner. Unless any provision of state law or the LLC agreement warrants a different result, the chief counsel concluded that a Form 2848 signed by the tax matters partner in the name of the LLC is sufficient to bind both the LLC and the LLC members.
The chief counsel concluded that, although the CFO may have authority to act in certain capacities on behalf of the LLC, the LLC agreement did not appear to give him authority to enter into agreements or other written instruments, such as the authority to execute a power of attorney, on behalf of the LLC.