Watch your Operating Agreements

A recent private letter ruling reminds us - if you have a client that is making an 8832 election for an LLC to be taxed as a corporation (and then an S corporation) - and that LLC used to be a tax partnership - make sure that the operating agreement does not reflect partnership allocation language.  

You can fix this - in this PLR the taxpayer was given administrative grace to fix its operating agreement and cure some distributions inconsistent with an S corporation- but it will be with a letter ruling and the fix is not guaranteed.

Make sure you review the operating agreement and amend it before the conversion!