Tax help with home business partnership?
December 17, 2010 | In: Home Designs
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Question by Fiestyone: Tax help with home business partnership?
Is it possible to go into a home based business with a close friend as my partner? Just brainstorming as she is majoring in graphic arts & web design & mines is sales & marketing. My home would be the physical location for the business, so would this be difficult when it come down to reporting our incomes earned and taxation? As we don’t live together & both have other jobs, this would just be a side income earning business. Thank you for your input!! Is this do-able?
Thanks for the replies! Mrreliab we are brainstorming college students with no plans to do anything within the next 2 -3 years. Was interested in knowing if this was a do-able idea, didn’t say we would do this next month, so we’ll pay for professional advice when we get further along, but thanks for the info!!
Best answer:
Answer by tro
if you form a partnership you need to get an EIN number, you will be r’qd to file tax returns every year, a 1065
I frankly would not suggest you pursue this avenue, but work out some other kind of arrangement that she pays you for services rendered or something based on her success or how much of her success is a result of your marketing
she could issue you a 1099 at year’s end and can claim that as an expense on her Sch C
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2 Responses to Tax help with home business partnership?
David H
December 17th, 2010 at 8:35 am
Ya, it is do-able. The taxes could take a little time to figure out. I am currently trying to figure out a home based sole proprietorship Business taxes.
You will find that getting all you need is pretty easy and not too expensive. If you are in ca you will need a business liscense and there is a small fee per added person on the liscense. Remeber, they want you to have a business, it is one of the resources of revenue for government.
I think it is a matter of figuring out how much each one will earn. Most of the software for filing will help with that.
mrreliable3599
December 17th, 2010 at 8:37 am
Sure, you can form a partnership. A parternship is a “pass-through” entity. Partnership income and expenses are reported on Form 1065. Net income or loss is reported to the partners on Schedule K-1 for reporting on the individual partner’s Form 1040.
You could also involve an LLC, S corporation, or C corporation.
Not to be mean, but you already scored a negative 10 points for business sense going to an internet forum to ask questions about a business entity. If you can’t afford professional guidance or just think it looks easy and you can do it yourself, not lots of chances to be successful in a business endeavor. Businesses are always harder than they seemed before the excitement wore off.
Unless you understand exactly the differences between capital expenditures and operating expenses, an income statement and a balance sheet, inside basis and outside basis, allowable capital contributions vs. partner’s distributive share of income, you need to hire someone to assist you.