December 27, 2013. In merging or dividing partnerships or LLCs taxed as partnerships there are tax rules that need to be applied in order to best fit that partnership’s situation. Tax rules say that all mergers and divisions of tax partnerships must follow either an assets-over or assets-up form. Below I explain the difference between the two, to help you (the CEO) better decide which form to choose to avoid the tax consequences.

Assets-Over / Assets-Up Merger

An assets-over merger takes place when the terminating entity contributes its assets and liabilities to the surviving entity. The surviving entity passes on its interests to the terminating entity who distributes these interests in complete liquidation to its members.

An assets-up merger occurs when the terminating entity distributes all of its assets and liabilities in liquidation to its members. The members then contribute them to the continuing entity for interests in exchange.

Assets-Over / Assets-Up Division

An assets-over and assets-up division is close to the same as explained above, however, the actions take place with one entity dividing a portion of its assets.

Understanding the Law

Understanding the various laws behind mergers and divisions of partnerships is crucial when attempting to avoid tax consequences after a merger or division takes place. Going through a merger or division and unsure about what steps to take next? Having a legal team to guide you through all the steps from legal to financial will take the headache away from guessing if you made the right decision.

For more information on mergers and divisions of partnerships contact Goosmann Law Firm, PLC at or call 712-226-4000.

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