Forming a Business Partnership – Avoid Self-Directed IRA’s & Other Tax Problems!
Forming a business partnership is an excellent way to take your business to the next step, but there is no guaranteed success in doing so. Whether you’re forming a joint venture with an acquaintance, trusted friend, or an experienced investor who’s passionate about an ideal idea, there are some important considerations to weigh prior to putting your mark on the partnership agreement. You’ll want to know how you will share profits, and how you will divide up the losses of the business. In addition, you should consider whether the new entity will have any management fees. Finally, you should determine whether the new business has the potential to grow beyond the initial investment.
The first step in forming a partnership is to create a well-written business plan that outline your expectations for profits and losses, as well as those of the new entity. Your partnership agreement should detail all aspects of your operations, including both the short-term goals and long-term ones. If you intend to use your profits to expand your business, make sure you include a projection of your revenue growth for the next five years.
Shareholders are often unhappy with the revenue shares that result from partnerships. Consequently, they can elect to apply dividends either by annual payment or in one large payment. This can create problems if the partnership taxes pass-through the dividend to the other stakeholders. If the business income is more than the share holders see in their annual profits, they could lose money if they have to pay the tax. For this reason, you should only elect to pay the tax on an annual basis if you have the funds to cover the cost. These auctions, via sites such as Boat Parts are also available online.
To ease the problem of not receiving the corporate tax payments that you deserve, it is advisable to create a general partnership in which both entities share in the profits. Generally, the partners control the partnership, with the general partner acting as the primary holder of the partnership’s shares. Once the partnership becomes a general partnership, it can no longer be involved in the usual Pass-through taxation scenario. In order for this to work, the partners must invest their personal shares of the partnership’s assets in their own companies, so as to minimize their general partner’s tax liability.
Forming a partnership with the services of a professional law firm is an excellent way to handle business matters. Ennico LLC is a full service, California business firm that can help you with your partnership and business issues. By ensuring that your partners comply with the laws that are specific to your area, the firm can help you avoid problems with the IRS.
Forming business partnerships is a lengthy process, but it can be accomplished with ease when you use the services of a professional company. Ennico LLC can walk you through the process in great detail, including guidance with the IRS. To learn more about partnerships, contact Ennico LLC today.