Forums **Ask A Question** Bsuiness Lic & taxes

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  • #24958
    Palani Wright
    Post count: 20

    Hi Everyone,

    I wanted to ask this group of pros & novices what they do in regards to setting up their company. Do you use a LLC, Sole, C-corp or S-corp etc.? and why you chose that way?

    Also, if you partner up with someone on a deal…how do you structure the taxes in each circumstance. Do you split the profits & let each party handle them on there own? Im curious…

    Thanks in advance…this group rocks!!!

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  • Kevin Farrell
    Post count: 1576

    Palani – you can do sole proprietor but I recommend an LLC. When I partner on a deal I am either the owner or the funding partner and sometimes I am both. No matter what side of the deal you are on you only pay taxes on the profit. If you have a deal with a $20K profit split evenly, then each party in a two member partner deal will get $10K in profit. Be sure to calculate profit after all expenses and closing costs are subtracted from the sale price. You should file a 1099 for the partner if you are writing them a check after the sale. I used to skip this but my tax guy says it’s important. If both parties get paid out of closing, then the title company should file the 1099 for each person. However, they will not be careful with calculating profit and will state the entire gross profit. You will have to follow up at tax time to file in those states. Get a good CPA/Tax person.

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