If I enter into a partnership agreement with another business owner, what should I be aware of from a tax perspective?
Tax Professional Answers
The partnership itself will not pay federal income tax, but rather the partners will pay federal income tax on their share of earnings. Those earnings will also be subject to self employment tax if they are a general partner. State level taxes may vary depending on what state your partnership is located in.
1. Making sure partnership solution is the appropriate vehicle to operate your business;
2. Ensuring that the profit and loss sharing arrangement between the owners is respected for federal tax purposes;
3. Obtaining tax free treatment on the contribution of the businesses;
4. Selecting the appropriate tax method to account for existing built in gains/losses in the businesses and associated deductions;
5. If you have a long-running business, considering whether the disallowance of amortization on goodwill applies; and
6. Planning for the unanticipated events, such as the death of a partner.
This a hand-full of items to consider and many more could apply depending on your particular situation and business deal. Let me know if you need any assistance, I specialize in these types of transactions.
Tax Questions By Topic:
Meet Leading Tax Advisors
Lakeland, Florida, USA
New York, New York, USA
Federal Tax Credits & Incentives Practice Leader
Denver, Colorado, USA
Fullerton, California, USA
Topanga, California, USA
Rancho Santa Fe, California, USA
CEO/Certified Financial Advisor
Tyrone , Pennsylvania, USA
Greenville, South Carolina, USA
Longview, Washington, USA
Tax Consultant/Tax Advisor
Santa Clara, California, USA
Tax Principal - President
Stellenbosch, South Africa
Exchange Control & Master Tax Practitioner (SA)
Boston, Massachusetts, USA
Tax Partner, International Tax
Senior Tax Manager
Toronto Mississauga Oakville Burlington Hamilton, Canada
West Palm Beach, Florida, USA