You are starting your business and are extremely excited. You have everything ready, even a cool name, and hence you want to rush with it. The most important decision is still to be taken. Partnerships are association of two or more people who carry on the business together.
When starting a new business, it is always simplicity and profitability of the procedure that lures the people involved in the venture. One of the simplest business entities is the general and limited partnership. They do not involve elaborate procedures, but just calls for a business Tax ID number and “Doing Business As/Fictitious Business Name” information. The undertaking is undoubtedly simple, but there are certain things that have to be kept in mind while drawing up the partnership agreement.
- Each partner’s role in managing and authorization transactions
- Duties and responsibilities of each partner
- Contributions to the capital
- Rights regarding profits
- Dissolution of the business
- Voting requirements for decision making
One of the best features of this business entity is its immense flexibility for filing taxes. The equation in the partnership is calculated based on the investment made and the loss or the profits of the partners. If partners decide on a 50/50 split, that is the percentage each partner receives of the business and any profits. When tax time rolls around, income is listed on a 1040. A Form 1065 and Schedule K are also forms you’ll be seeing. Each partner is responsible for paying his or her self-employment tax. As far as the liabilities in this entity is concerned, there is unlimited liability where the partners are responsible for each other’s debts.
Some means to maintaining the partnership are:
- Documentation and communication
- Being involved in the business undertakings
- Tax deposits and bookkeeping
Keep your partnership sound with these few steps and reap the maximum benefit of your business. At IRS-EIN-Tax-ID.com, we’ll help you get your partnership set up.
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