Discussion:Start-up Partnership run like Sole Prop?
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Start-up Partnership run like Sole Prop?
| 23 March 2007 | |
| Got a client who started business,March/2006, w/daughter, however, the General Partnerships "books (income & expenses)" where brought to me w/info on a couple of notepad papers penciled in---"startup costs, gross sales, rent, machinery, etc...... According to father its 50-50 "Partnership" and no partnership agreement was drawn up w/the formalities of guaranteed payments, again, etc.... According to the father whatever income is brought in the income is used to pay expenses and whatever is leftover is "take home pay" I'm guessing. To put in fathers own words: "my daughter and I are just trying to run a sucessful business". Any input per 1065? | |
| 24 March 2007 | |
| I have read your question twice and have no idea what you are asking. Really sorry. | |
Bottom Line (talk|edits) said: | 24 March 2007 |
| Sounds like a 1065 needs to be filed. You've got records from them, they just happen to be on notebook paper instead of typed up and pretty. I get this kind of stuff all the time. They're on the right track. They kept records. Now's your chance to encourage and educate them. | |
| 24 March 2007 | |
| The only return prep problem I see is whether the startup costs are enough to be broken out. More than one-year write-off one gets. A 2-person p/ship in this case is presumed by IRS to be 50/50. Oral partnerships are valid under State law; just deferred income for the law profession when things go wrong. Implied poor records, but enough info as to line items to prepare a complete return, is not our problem.
If a significant business, any reason Dad and Daughter haven't thought of an LLC? Do they even have biz liability insurance? Between this and preferable records, we start educatin' like Bottom_Line said. | |
| 24 March 2007 | |
| Appreciate all the input and significantly helps me. The one main "hitch" is the "trail of income". I'm not sure how, if any, to report income to both partners because books do not show income payments to partner. | |
Bottom Line (talk|edits) said: | 24 March 2007 |
| Talk with the father a little more. You say that you're "guessing" whatever is left is take home pay. | |
| 24 March 2007 | |
| Income payments to partners would be distributions. A partnership would file 1065 return and pass thru earnings to the partners. Partnerships do not have limited liability protection, LLC may be good idea. The advice we provide in this letter is not intended or written to be used, and cannot be used by you or any other person or entity, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or any applicable state or local tax law. | |
To join in on this discussion, you must first
log in.
