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Re: Payroll/Taxation question Posted by Herb Hirsch [Email] (#114) [Profile/Gallery] (more from Herb Hirsch) on Sun, 29 Mar 2009 08:24:28 In Reply to: Payroll/Taxation question, Dave, Sat, 28 Mar 2009 18:26:56 Members do not see ads below this line. - Help Keep This Site Online - Signup |
The money you've received last year could fall into several different categories.
1. Profit on capital invested.
2. Repayment of a loan made to the business, and what is interest versus principal.
3. Compensation
4. A mixture of the above.
And could be under several different business organization forms.
1. Partnership
2. Sub-chapter S corporation
3. LLP
4. LLC
You and your partner will have to decide which form is best for you from a LONG-TERM perspective. Tax consequences and organization costs should not be the determinants. Long-term plans and business strategies are a better guide.
Engaging a lawyer and accountant is the first step, probably in that order. Sooner is better. Operating an undocumented partnership, which is what it appears you have, has a lot of unnecessary risks; a lawyer with the right background will help in sorting this out.
The cost of the lawyer and accountant is minor versus the consequential costs if there were to be a problem. As one for instance, operating without a documented plan (including provisions for succession) could be disastrous if one of you were to suffer an untimely demise or divorce.
Herb Hirsch
South Brunswick, NJ
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