We have refurbished our office and are in the process of getting new signage, a new Logo, business cards, stationery, etc.

I will make a strong effort to begin blogging again.  There are so many new tax laws and changes this year that will give me much to blog about.

It seems my whole life is on hold right now until we get this first wave of people taken care of.  I’m going to have some good stories to blog about when I get caught up, so stay tuned!!

I have been extremely busy the last week getting my Tax Office ready to open for the Tax filing season, which begins this friday.  I will continue to post, but probably not every day.

Tax season is just about to get started.  The phones are ringing off the hook with people calling about tax loans and wanting to know when they can get their money.  With the current economic conditions, I think that everyone will be in extremely early to get their taxes done this year.  Of course, the IRS doesn’t open until the 16th of January, so it is still a couple of weeks away.

I hope everyone who reads this had a Happy Holiday season and I hope the New Year will be prosperous for all of you.  I’ll be posting more on Income Tax and continue with my series on business entities later this week.

It’s hard to think about a breakup when the business is just getting started, but many partnerships split up at crisis times, and unless there is a defined process, there will be even greater problems.  They must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership

Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.

With more than one owner, the ability to raise funds may be increased.

The profits from the business flow directly through to the partners’ personal tax returns.

Prospective employees may be attracted to the business if given the incentive to become a partner.

The business usually will benefit from partners who have complementary skills.

Disadvantages of a Partnership

Partners are jointly and individually liable for the actions of the other partners.

Profits must be shared with others.

Since decisions are shared, disagreements can occur.

Some employee benefits are not deductible from business income on tax returns.

The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

Types of Partnerships that should be considered

General Partnership – Partners divide responsibility for management and liability as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states otherwise.

Limited Partnership and Partnership with limited liability – Limited means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects or for investing in capital assets.  This form of ownership is not often used for operating retail or service businesses.  Forming a limited partnership is more complex and formal than that of a general partnership.

Joint Venture – Acts like a general partnership, but is clearly for a limited period of time or a single project.  If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such as well as distribute accumulated partnership assets upon dissolution of the entity.

That’s it for Partnerships.  My next post will take up Corporations. I’ll deal with regular corporations, Subchapter S Corporations, and Limited Liability Companies (LLC).

I’m closing down next week for the Christmas Holiday and will not post again until after Christmas. I hope all of you have a Happy Holiday Season.

Guess who will legally responsible for all the lawsuits and claims against the business.  The claims could be filed against everything he owns.  It could be financially devasting. I advised him to incorporate, which would limit his liability for judgements against the corporation.  He is now a happy client.

Some of the advantages of a Sole Proprietorship are:

Very easy and least expensive form of business to organize.

Sole proprietors are in complete control.

They receive all income generated by the business to keep or reinvest.

Profits from the business flow directly to the owner’s personal tax return.  The business portion of the tax return is filed on a Schedule C on he return.

The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship:

Sole Proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk, as in the example I gave you.

They may be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.

They may have a hard time attracting high-caliber employees or those that are motivated by the opportunity to own a part of the business.

Some employee benefits such as owner’s medical insurance premiums are not directly deductible from business income (only partially  deductible as an adjustment to income).

In my next post I’ll give you the details on the Partnership form of ownership.