Feb. 11, 2025

Forming a Partnership, Limited Liability Company

Show Notes
Transcript

Creating a partnership, Multi Member LLC or LLP steps to consider. Choosing the right partner & the right entity. Type of partnerships. Entity choice & taxes. Pass-through taxation. Registering your partnership. Get your Employer Identification Number, EIN, Taxpayer number. Determine your tax obligations, forms & Filing dates. Partnership agreements. Business bank accounts, business and personal expenses separate. Bookkeeping & managing business. Owner Operator starting a business.

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The topics and opinions express in the following show are

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solely those of the hosts and their guests and not

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those of W FOURCY Radio. It's employees are affiliates. We

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Barry G.

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Fouler EA brings you tax Talk for You right here

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on W four CY Radio.

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And Talkboard TV.

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As an enrolled agent and a national leader in tax

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resolution as well as Trucker bookkeeping and tax planning.

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With over thirty years of experience.

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Barry will break down taxes, bookkeeping, tax planning, and tax

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relief for individuals and businesses just like you. So let's

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have some tax Talk for you with your hosts.

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Barry G. Foul Well, Good morning, USA. It's a great

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day here at Tax Talk for You again. Go to

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Tax Talk for You and subscribe so you make sure

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you stay up to date. If you miss an episode

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or a show. You can go back and see our

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podcasts there. iHeart radio and Spotify and amuch of many

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other places that our podcasts are hosted at. You know,

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I hate love to say this. This is a great

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day in America. Have been great, you know, three weeks

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that we've had President Trump in office, and whether you

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like him or not, what he's doing for America saving

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through his new agency DOGE that saving America's billions of dollars.

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They have uncovered a lot of wasteless spending which we

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all knew was there because we're overtaxed, and it's time

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to end over taxation and get us to a balanced budget,

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get us to you know, doing what the federal government

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is supposed to do, and not trying to manipulate what

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people in America are thinking or bribing them to vote

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one way or the other. Let's just get back to

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the necessities in life and let the states handle the

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issues within each individual state. That is what America was

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created and founded on, was states' rights, not all the

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rights being at the federal government level. That's my soapbox

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for today. But you know, hey, we're here to talk

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about partnerships. You know, ready said go let's learn how

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to form a partnership. You know, we got about ten

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steps in forming a partnership. So you decided, hey, you

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want to go into business, and maybe you're not going

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to go into business for yourself. Maybe you're going to

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go into the business with somebody else, even a wife,

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maybe a brother or brother in law, sister or sister

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in law, whatever it may be that you're going into

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business with. You've got to decide how are we going

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to set up this business? You know, so you know,

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if you're not going to run this solo, you start

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this partnership. You can form a partnership. Now, partnerships come

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in many different ways. You can have a general partnership,

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which is just a partnership that you go down to

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your local assumed name office and you say, hey, me

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and this other person is going to do this partnership,

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and then you have a general partnership. You can set

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up a partnership being a limited partnership, so you would

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have a limited liability partnership in LP. And you can

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also to have a partnership as a limited liability company.

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So there's many different structures that you can have when

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you're going into business and trying to be wanting to

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be a partnership. So you've got to start thinking which

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is the best for me? Where do I want to

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be as a partnership. And sometimes before you go into business,

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it is good to consult two people. One your tax guy,

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your tax coach, your guru that knows all about taxes

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and how having a partnership is going to affect your

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personal taxes for you and your other partner or partners.

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This partnership can have multiple partners more than one other person,

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so you might need to know how is this going

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to impact my personal taxes or the other partner's personal taxes.

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The other one is to contact your attorney attorney because

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partnerships sometimes come with some liability protections. So and sometimes

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those liability protections are going to fall into the LLC

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category or the LLP category. But make sure you're discussing

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that with your attorney because your attorney will be able

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to tell you do you need liability protection in what's

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going to give you that protection for you and your family?

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General partnership from everything I understand, is that going to

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give you any of liability protections for you, your family

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or your partners So again you might want to make

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sure that what you are doing, you are going to

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do it correctly and choosing the right structure for your

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business and your partnership. Now, the good news is partnerships

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are not taxed themselves, so you're not going to face

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double taxation unless you make an election to be taxed

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as a corporation. Then your partnership could have would have

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a tax and then when they pass the money through

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to you, you will be taxed again as a dividend

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or as payroll. So your general partnership, your limited liability partnership,

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and your LLC which would be multi member and be

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taxed as a partnership all pass net income to each

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of the partners based on either they're a pro rata

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share of capital. Your partnership agreement can give a different

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split between partners is different than the ownership percentages, but

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it will be passed through. So therefore you won't have

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double taxation where the company is getting taxed and then

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you're getting taxed. So you want to make sure that

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you're setting this up correctly and then look at what

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is the tax implications for this. So now you decided, hey,

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I am forming this partnership and you know, we've got

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six steps to be successful at getting this partnership formed

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and formed correctly. We see many many mistakes of business

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owners who think they formed their business correctly and they've

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done it incorrectly. They've done taken the incorrect steps, and

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then the cost to get it fixed sometimes is more

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expensive than just getting it and doing it right the

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first time. So first step, choose your partners. Choose them wisely.

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So you're going through all this work to set this

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business up and you're going to be working closely with

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your partners, So make sure you take your time when

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you're choosing your partner or partners in the business. You

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know things you're going to make sure that they're bringing

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to the table. What skills, what are their strengths actually,

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what are their weaknesses as well? What is their knowledge?

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What is their credibility? So maybe you're not going to

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work with the family member, you're going with a friend,

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You're going with somebody outside, somebody you're bringing in because

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they've got the knowledge to do something that you don't

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have and you need to bring them in. Or maybe

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they've got the credibility in that industry that helps add

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a level of strength to your business. You're also going

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to want to make sure that your partner is financially stable.

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You know, you want somebody that has some strength and

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financially that you know that it is not going to

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be hurting or bleeding the business absolutely dry of funds.

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You want them to have the same vision as you

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do for where this business will be going. And you know,

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maybe they bring in additional contacts and other resources for

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the partnership. You know, I always tell people, hey, don't

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rush when you're selecting your partner and deciding to go

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into a partnership. Maybe when you're asking yourself what do

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they bring to the table when we get along, do

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we share the same values and taking a little bit

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longer time to think about those issues sometimes it's better

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and maybe you can decide that, hey, maybe I just

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want to be a single member LLC. I want control

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of this business and I can employ this other person

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and therefore, if it doesn't work out, we don't have

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to unwind a business. We just can fire him or

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her in let him go. Or maybe you're bringing somebody

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in doesn't share it completely all your values and you

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want to make sure you still control more than fifty

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percent of the business. You're the one making the decisions. Hey,

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remember this is a commitment. This is almost like a

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marriage when you're going into a partnership. When we come back,

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we're going to also talk a little bit more in

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depth about determining your type of partnership in this business.

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We'll be right back after this.

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We have only scratched the surface of today's show. Please

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stand by as Barry G. Fouler will be right back

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with tax talk for you. If you own the IRS

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or are going through an IRS audit, don't go at

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it alone. Called Taxation Solutions tax Relief at eight eight

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free no obligation consultation. Let's get back to tax stock

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for you with more tax stock once again. Here's your host,

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Barry G.

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Feller. Hey, welcome back Taxation Solutions, Tax relief, providing relief

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to individuals who owe the Irs money, and when you're

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that number is eight eight eight nine three zero one

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zero one six go to tax Station Solutions died at Hey.

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We're talking about forming partnerships and the different kind of

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partnerships that are out there. We've touched about this a

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little bit, but the general partnerships, you know, generally it's

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a company owned but two or more people and you

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agree to run it as partners are co owners and

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usually the profits are split, you know, fifty to fifty,

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unless you guys make some other arrangements or maybe change

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the partnership agreement on what the ownership percentages are. Generally,

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this doesn't provide any liability protection. If the business dissolves,

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you're both responsible for the debts one hundred percent. So

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if your partner can't pay fifty percent of the debts,

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you're going to end up paying one hundred percent of

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the debts. So you want to make sure that. Again

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you're vetting who your partner is going to be in

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this business. But you know, hey, these are low costs,

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easy to establish, flexible, but again the downside is those

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personal assets are probably going to be at risk. You know,

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not to men and mention your partner, and you are

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liable for the other person's actions as well. You're limited partnerships.

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These are going to be more structured than general and

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usually have both a general and a limited partner, so

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you're gonna need when you start this business, you're gonna

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have to have one general partner and at least one

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limited partner, So you know, a limited partner is only

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serving as an investor in the business typically doesn't have

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any decision making. They get ownership but don't have as

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many risks or responsibilities as a general partner, and if

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you hired to involved in the business, you can lose

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your status as a limited partner out there. General partners

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usually operate the company and assume liabilities for the partnership.

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General partner, you have control and responsibility when it comes

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to this limited partnership. So the other one is a

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limited liability partnership. It's in this organization you the owners,

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aren't held personally responsible for the business debts or the

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other partners actions. With an MLLP, you typically can't lose

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your personal assets if someone takes legal action against your business,

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but you still can be held personally liable if you

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do something wrong. So we take this as an example.

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In the owner operator trucking business, you're operating the truck,

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you get in an accident, God forbid, knock on wood.

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If you're driving a truck, when you're involved in that accident,

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whether it's your fault or the other party's fault, you

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typically will end up getting sued. And you're not getting

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sued just in your business. But you're getting sued personally

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for your actions. Now when you're an employee, if you

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have employees of the business and the employee does something wrong,

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in unlimited liability partnership, your responsibility ends where the company

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is and it doesn't go past that. So you're not

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responsibility responsible for other people's actions. You're only responsible for

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your actions. Or if you have a partner in this

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and they're driving the truck and they get into an accident,

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your responsibility ends at the limited liability partnership and it

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doesn't come to you. But again it's all your attorney.

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Make sure you've got everything set up right and you

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have the liability protections that you need out there to

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save you in case something does happen. LLC as a partnership,

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you can have two or more owners. These owners are

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considered to be members. In a multi member LLC or

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LLC partnership, members personal assets are usually protected. In most cases,

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members can't be sued for the business actions or debts,

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but they can still be held liable for their own actions. Again,

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that same example, if you are a owner operator and

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you operate it out and I'll see you get in

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an accident, you're responsible for your actions, company and your

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other members of the LLC would not be held responsible

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for you unless you have talked to an attorney, you could

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they could find a way that you've been condoning bad

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actions of this other partner. So you know, hey, in

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this day and age is a latigious society. You never

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know where the lawsuits are going to come from, or

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what reason why, and where they're going to stay out. Now,

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we also talk about in all these businesses, when you

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start mix mixing business and personal in your business account,

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guess what they're going to pierce. What the attorneys tell

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me is what they call the corporate veil. And when

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they pierce that corporate veil, now your personal assets get

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involved as well. So you need to make sure that

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you're not commingling funds and actually running personal through the business.

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That's why we tell people, hey, make sure you do

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only business through your business accounts and personal through your

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personal accounts. It's first conversation we have with every one

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of our Truking bookkeeping clients as we start them on

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the road to great bookkeeper. Now, you know, choices, choices, choices.

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Everybody's got to make a choice. How do you want

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to be structured. What is right for for you? What

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is the best way of structuring this business? Sit down,

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talk to your tax guy, talk to your attorney, Talk

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with your partner or future partner. To make sure that

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what you guys are going to do, you're going to

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be able to dot your eyes across your t's so

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you know, make sure that you know where you're how

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you're setting up your business. You know, one of the

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most complicated things and setting up your own business and

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setting up a partnership or setting up an LC or

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setting up a corporation's coming up with a name for

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your business and for your partnership. You know, you sat

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down and talked about, you know, the type of partnership

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you've come up with, creativity and how you're gonna design

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this business and what you're going to do. But now

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you need that name. And name of a business is

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just as important because sometimes it identifies what you do.

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Trucker Tax Tools, for instance, we do taxes for truckers

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and thus the name Trucker Tax Tools. We're giving our truckers,

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our owner operators, the tools they need to run their

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business and lower their taxes. You know, we have a

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lot of fun in this business and I speak at

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Trusual Success, which is a seminar put on by O

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I D a Owner Operator Independent Drivers Association's Foundation every year,

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and when we talk to people moving out from W

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two drivers to owner operators and working for themselves. And

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you know, we've seen a lot of different creative names

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that are out there, and we have fun and we

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have fun working with truckers. So you know, there's a

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lot of things to be said when you sit down

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and start naming your business to identify you know, Hey,

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what do you do and how do you do it?

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We come back, We're I talk about registering your new partnership.

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We'll be right back after this.

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We have only scratched the surface of today's show. Please

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stand by as Barry gif Fowler will be right back

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with tax talk for you. As an owner operator, you

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already spend too much time away from your family. Trucker

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Tax Tools handles all your bookkeeping and taxes. No matter

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what level trucker you are. Life on the road can

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be taxing, but that doesn't mean that your wallet or

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time with your family should suffer. Trucker Tax Tools makes

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your life run smoothly. Go to Trucker Tax Tools dot

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com for a free guide that will give you the

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tools to never worry about your taxes again. Call Trucker

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Tax Tools eight seven seven nine sixty six two four

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seven seven or go to Trucker tax Tools dot com

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now and let the experts keep you truck it. Let's

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get back to tax Talk for you with more tax

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talk once again.

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Here's your host, Barry Gallo. Hey, welcome back Trucker tax

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Tools dot com working with truckers and helping owner operators

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and keeping them on the road. This weekend we were

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having a board meeting and talking about what can we

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do and what can we offer to truckers this year

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that is new and different from anything else we've ever done.

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And right now, if you go to Trucker Tax Tools

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or you call them at eight seven seven ninety nine

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six two four seven seven and talk to them about

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your taxes for twenty twenty four and your bookkeeping for

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twenty twenty five. What we're going to do for you

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if you're a new client, call in you know anytime

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you know this week and mention tax Talk for you special.

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We're going to give you six months of free bookkeeping

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with your paid twenty twenty four tax return again six

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months free bookkeeping with your twenty twenty four personal tax return.

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So come to us, bring, let us do your personal

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twenty twenty four tax return, and we're going to give

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you that six months of free bookkeeping for twenty twenty five.

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I can't wait. I mean, it's it's a fantastic deal

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that they've come up with and the board has talked about.

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And you know, we're expanding, we're growing. We're here to

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help you as an owner operator stay on the road

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and know what your net income is from your business

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and how you can reduce your taxes and making sure

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you got every write off that you can possibly have

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as a trucker. Hey, we got a question in before

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we move on registering your partnership. Brandy asked if we

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can explain more what is the difference about what gets

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paid from where and what is that corporate veil we've

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talked about. Randy, Thanks for the question. The big difference

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is you've got to look at what you're paying out

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of the business. If it's a business expense, ordinary and necessary,

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something that's deductible for the business, it is business irs terms,

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it ordinary and necessary. Your home mortgage is not a

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business deduction. Your home utility bill is not a business deduction.

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Maybe you've got a home office and you'll be able

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to take maybe home office expenses, but you can't write

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those things out of your business. Your lawn care, things

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that you have going on that is personal, your family food.

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If you're buying coffee and supplies for an office and

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you happen to be at the store, you can itemize

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it and do an expecial report to your business and

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have your business reimburse you. Or if you have a

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business credit card, you can do two orders while you're

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at the store. We do this quite frequently and put

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the business stuff on the business credit card and the

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personal stuff on your personal credit card. It's that simple,

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just breaking down what are the business expenses, what are

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the personal expenses, and making sure you're not doing that.

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Corporate veil is a term we've gotten from the attorneys

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out there. So you've set up this limited liability partnership

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and the liabilities aren't going to flow out of that

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limited liability partnership or LLC to you as a limited

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partner as a member of the LLC, of course, unless

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it's your own action and it stays within the business.

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Meaning let's say you've got a couple of people working

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for you, you and they do something wrong, the company

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gets sued and you lose. That liability stays right there

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within the company. They're not coming out after your personal assets,

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so it gives you that protection. Now you've com mingled

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business and personal and it's like running a sofialprodership. It's

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open season and there's no going to be no personal

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asset protection based on the attorneys that I've talked to

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about this and losing that corporate veil. And that's the

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same thing if you're running a corporation as well as

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LLC or limited liability partnerships or even a limited partnership,

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so you know that protection doesn't stay there if you

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are commingling funds, so registering your partnership, you finally creatively

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game up with a great name. Well, first thing you

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want to do if you're trying to do this on

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your own is go to your Secretary of States office

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at C is that name taken? Because maybe you came

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up with that great name truck or tax tools, and

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you go and you find out it's already owned. Somebody

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Forming a Partnership, Limited Liability Company

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