What Type of Entity for This Business?

[zeros]

Client and his girlfriend are considering starting a new business which would be "Judgment Recovery." Both would be active in the business. I'm thinking this type of business is risky and he would need some kind of protection. Would just 2 schedule "C"s do it? S Corporation? LLC? Any recommendations?

[BHoffman]

I'm thinking LLC taxed as a partnership would be the simplest way to go.

[ChEAr$]

I'm thinking LLC taxed as a partnership would be the simplest way to go.

And I'm thinking, much as I hate to say this, consult with qualified legal help first to assess
the risks and potential liabilities.

But if no great risks, etc, a qualified joint venture, i.e. two schedule c's.

[BHoffman]

I still vote for 1065. Much cleaner and easier to keep substantiation documents. Will they "split" the fixed assets? "Split" the office supplies? Do they live together with a "split" home office? I could go on and on and on but I'm running out of single malt I mean..blood thinning medicine.

[BHoffman]

Darn it, and I just ran out of cheetos too. Well, so much for supper...

[Nashville]

Split Reporting

I still vote for 1065. Much cleaner and easier to keep substantiation documents. Will they "split" the fixed assets? "Split" the office supplies? Do they live together with a "split" home office? I could go on and on and on but I'm running out of single malt I mean..blood thinning medicine.

Cannot give you cites (except for Husband/Wife partnership), but it is allowed for a business to operate as a single entity, yet each owner claims half the revenue and half the expenses on separate Schedule C's. The split bookkeeping of which you speak occurs only at year end, and only on Schedule C's.

Don't know how this is measured if the equipment involves only one such owner or whether this spoils the whole show. In a pure partnership, in cases where one partner contributes equipment, the OTHER partners are allocated the depreciation expense in splitting the income.

We have discussed before how partnership returns are avoided, and the overwhelming sentiment is if all the rules are followed, they should not be avoided. But two doofuss guys pop in my office and tell me "We're sorta partners" until I tell them how much it costs to file a partnership return. After their eyes bulge outa their head, they tell me "Well, we're sorta NOT partners." There has been more than one occasion where I have filed two Schedule C's just to get income properly reported - saving time and misery for myself, for the clients, and for the IRS. Not one penny of tax revenue was sacrificed.

[BP.]

Darn it, and I just ran out of cheetos too. Well, so much for supper...

Did you check under the sofa cushions?