Partnerships

How are partnerships formed? What are the characteristics that justify this entity status over others?  Once you fully understand partnerships, you will appreciate their flexibility and the ability to control a business without a large investment.

Tenancy in Partnership

Tenancy in Partnership

Tenancy in partnership is an important principle in understanding an individual partner's ownership right as it relates to the partnership and the law of partnership.   Does he own the assets jointly or as tenants in common?

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Bookkeeping – Charitable Giving (Lesson 64)

Charitable Giving

Many small business owners are actively involved in the community and thus donate time and money to their favorite cause.  In almost every case the owner believes the donation is a business deduction.   It is NOT a business deduction for tax purposes except under the C-Corporation status; however, the business is still writing the check. Therefore the bookkeeper must still track the deduction and identify the donation properly so the gift is deductible on the owner's personal tax return.

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Bookkeeping – Tracking Income Taxes (Lesson 58)

It is important for the bookkeeper to track income taxes for the business and the owners.  Tracking includes apprising management of current status and pending obligations.  In addition, the bookkeeper must make sure the payments are made to the correct authority for the proper amount and assigned to the appropriate federal identification number.  

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Double Taxation – Not an Issue in Small Business

Double Taxation

In the world of big business corporate earnings are taxed twice under the Internal Revenue Code.  The first layer of taxation occurs with the traditional corporate income tax.  The second tier of taxation happens when dividends are issued to shareholders.  The shareholder pays an income tax at their personal rate. 

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Joint Venture

Joint Venture

The average person may not realize this, but the most notable joint venture in existence today is the National Football League.  It figuratively owns every Sunday in the fall of each year.  It is an association of 32 clubs agreeing to compete with each other, i.e. engage in athletic entertainment.  Each venturer is its own business entity; the league generates its own revenue stream (mostly TV rights) and shares these profits with its members equally.

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Forms of Business Ownership

Forms of Business Ownership

When an entrepreneur starts out on his long journey of building a legacy with his business; he almost immediately focuses on the legal status of his business.   His thoughts include:  'Should I become a limited liability company or an S-Corporation?';   'What if I take on partners?'; 'How do I get more capital without giving up control?' 

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Aggregate and Entity Theories of Partnership

Aggregate and Entity Theories of Partnership

A partnership is defined as an association of two or more persons to carry on as co-owners a business for profit.  The premise is built around the notion that the combined power of the partners exceeds the sum of the value the partners could generate independently.

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Economic Substance Principle

Economic Substance Principle

The taxpayer must prove that the underlying economic transaction was not concocted to avoid or reduce tax liability. In the Gregory Vs.  Helvering case,  the Supreme Court actually uses the word  'sham'.

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Business Trusts

Business Trusts

The common law definition of a business is an investment of capital or property by individuals which creates the means to carry on towards the goal of generating a profit.   Every state recognizes different legal formats to conduct business.   The simplest and most common is the sole proprietorship .   Other forms include partnerships, limited liability company and of course corporation status (S-Corporation is a federal tax option of a corporation).   However, two states actually recognize another legal format - business trusts.

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