2 Began Music lesson bus - I believe Ptnshp or Sch C

[AZ-Tax]

2 unrelated people have started a music lesson business. No LLC or other bus entity. If they want to partner together, Partnership and if not, then each need to keep track of their portion of the business exps and business income. Then each will file a Sch C tax return. Sound correct?

[DaveinTexas]

Correct!

2 unrelated people have started a music lesson business. No LLC or other bus entity. If they want to partner together, Partnership and if not, then each need to keep track of their portion of the business exps and business income. Then each will file a Sch C tax return. Sound correct?

Everything you said is correct. It wouldn't be a bad idea to suggest they draw up some kind of agreement (as to the ownership percentage) and the duties expected of both parties. I've seen this arrangement before where both parties "agreed" the relationship was not a partnership until the relationship goes sideways and one party hires an attorney to sue the other "partner" for half of the business; nasty!

[Davc]

When two or more people start a (singular) business together you have a partnership.

[ChEAr$]

When two or more people start a (singular) business together you have a partnership.

But only if they hold themselves out to the public as a partnership.

As long as they don't advertise as a partnership, use common receipts for payments, they may otherwise share expenses and keep their own receipts for schedule c.

I reckon I'm just clarifying what Dave meant by 'singular'.

[appelman]

I don't think they really have that option.

Unless they are really setting up two separate businesses, I would think they would have to be a partnership.

[luke]

also

what about state business license(s) - one for partnership or TWO for Cs??

[ChEAr$]

Unless they are really setting up two separate businesses, I would think they would have to be a partnership.

When you get right down to the nitty gritty, it depends on "facts and circumstances", which we can't know here.

[Davc]

When you get right down to the nitty gritty, it depends on "facts and circumstances", which we can't know here.

The OP states "a business" which doesn't sound as if the facts and circumstances could support two separate unrelated activities.

[ttbtaxes]

It sure sounds like a partnership to me. On what basis would they file as two separate Schedule Cs? It's not a joint venture. It could be an expense-sharing arrangement if they both invoice separately, advertise separately and otherwise hold themselves out to the public as separate entities.

Is only one entity registered with sales tax?
Is only one entity on a lease?

[Gary2]

I don't think we have enough information to conclude that it's clearly a partnership, but I agree that in general, such arrangements lean towards being classified as partnerships by the IRS. They would have to take clear steps to make it anything else - the sort that I'd say should be handled by an attorney specializing in businesses and taxes. They may even be advised to form an LLC for liability purposes.