My Dad owns a coin shop - ive been helping him out for 3 months and we'd like to make it a more permanent situation. He is a sole owner. Will it be easier (and less expensive) for me to be a 5% partner or an employee? If Im an employee then workmen's comp and other issues arise BUT if Im a partner then there is no need for workmens comp correct? Any advice would be great!
-
-
Consult with a local tax professional - you have over simplified the question. -
Workers comp insurance is a state issue, and requirements vary from state to state. You need to talk to a local tax professional to understand the many, many issues you should look at in making such a complicated decision as this one.Originally posted by MorganC View Post"A man that holds a cat by the tail learns something he can learn no other way." - Mark TwainComment
-
Simplification
If he pays a salary, he must file Federal payroll tax reports quarterly (or, in some cases, annually) plus state and federal unemployment tax reports, so there will be a lot more tax reports which will probably cost more than it would cost to file a partnership return once a year.
Your 5% of the profits would be taxed to you plus any additional amount you would get in lieu of a salary which, in partnership lingo, is called a "guaranteed payment."
You would pay self-employment tax on your 5% plus any guaranteed payments. Unless you have an investment in the partnership, you cannot withdraw "capital" so anything over and above your share of profits and guaranteed payments that you take would be taxable to you.
Your personal 1040 would be a little more complicated with a partnership arrangement since you would have to file page 2 of Schedule E and Schedule SE as part of your Form 1040.Comment
Comment