QUESTION
If I buy an existing business (llc), am I responsible for any IRS audits of the business prior to my ownership?
Asked on Sep 26th, 2014 on Business Law - Florida
More details to this question:
I am buying a small business in a tourist town. It's a great location and the concept is wonderful - but in my due diligence I notice the owners seemed to fudge the last three years of tax returns to show a loss in the company. They are assuring me they really made money and showed bank statements and store records to back that claim. If I were to go through with the purchase...and that's a big if...would I be libel for an IRS audit on the llc tax records prior to my ownership?
1 ANSWER
In most cases and making an assumption that the business is classified as a partnership for federal tax purposes, no. However, a business run in this manner likely has potential liability issues that go beyond this federal tax issue. For this reason, you might want to investigate an acquisition of all of the assets (rather than the equity in the LLC).
Answered on Sep 29th, 2014 at 1:13 PM