By Robert J Wilczek and Douglas C Murray*
Australian companies often form partnerships to conduct their business operations in the United States in order to take advantage of certain benefits under Australian and US tax laws. Before forming a US partnership, an Australian company should take care to ensure that the nature and characteristics of the US partnership it intends to form, which may differ drastically from those of an Australian partnership, will not thwart the Australian company’s ability to realise Australian tax benefits or expose its treasury to “upstream” liability for obligations of its US subsidiaries.
A particular issue that could impact Australian tax treatment in respect of the US partnership is the “entity” treatment of most US partnerships. Unlike most Australian partnerships, which are considered “aggregate” sums of their partners, most US partnerships are legal entities that are separate and distinct from their owners. Another related source of confusion arises with regard to the nature and characteristics of the “alphabet soup” of US partnership types (eg, LPs, LLPs, LLLPs). In addition, given the litigious environment in the US, the Australian company should take steps to protect the Australian company’s treasury from “upstream” liability.
The full article can be accessed here: “Factors to be considered by Australian companies structuring US operations through US partnerships” (2010) 38 ABLR 246.
* Robert J Wilczek, Counsel and Douglas C Murray, Associate, Drinker Biddle & Reath (Chicago)