Before we begin the for is basic information about partnerships and taxes.
|What is a partnership?
A partnership is a business owned by two or more individuals or entities. For example, two
corporations can form a partnership.
can have employees and operate in all the ways that a corporation or sole proprietorship can. The difference is
that the financial and legal responsibility for everything rests with the partners. The partners have
unlimited liability, which means that their personal assets can be used to pay for business debts.|
|General versus limited partnerships
If you have investors who will not be directly involved in the business, you may form a
limited partnership, where the investors have limited liability protection. Anyone who is
involved in the business must be a general partner, and all limited partnerships must have at
least one general partner. There are forms for limited partnerships, but this kit
does not contain a partnership agreement for limited partners. Please contact an attorney.|
|Can my spouse be a partner?
||Yes, although Louisiana is a community property state and if
your spouse is not directly involved in the business, forming a partnership is unnecessary.
You should form a partnership if your spouse is directly involved in the business
and wants social security benefits paid on his/her behalf.
|Partners are responsible for each other's actions
|| ||Partners are responsible for the actions and debts of their partners, even if they were unaware
of those actions. So it is best to know your partners well and make sure that you both have similar sized assets at
stake. If not, consider forming a limited liability company or a corporation.|
|What if I want limited liability protection?
|| ||You can either form a limited liability company or a corporation.
companies are more flexible than corporations because you do not have to have annual
meetings with minutes.|
|Can I incorporate or form an LLC later?
|| ||Yes, but legally and for tax purposes, you will have to
"close down" the
partnership and "open" the new corporation or LLC. Your customers won't be affected,
but you will have to go through the paperwork and accounting processes.
|Revenue versus profit
||Hopefully your business will
have lots of sales...however, don't make the mistake of believing that your sales revenue is
available for hefty personal salaries or business expansion. Payroll must be
paid first. Then you will have to pay for your cost of goods and your operating overhead. About 50% of
the amount remaining must be paid in taxes (28% federal;
2% to 6% for state taxes 15.3% self-employment tax).
The remaining is available for your after-tax salary and business expansion.