I'm in business with two friends, and we have an unusual structure.
Our managing partner was in business alone, as an LLC, and the other friend and I joined him a year and a half ago.
For the sake of the discussion I'll call the managing partner Adam and the other friend Bill.
We don't have a formal partnership agreement. Just a written revenue and expense sharing agreement.
Bill has his own LLC and Adam pays Bill his net share of revenue less expenses.
I just file a Schedule C, and, as with Bill, Adam pays me my net share of revenue less expenses.
There will likely be some tax benefit Adam will realize with the new-for-2018 pass-through income rules, and he will share that benefit with Bill and me.
I know that optimally, we should form a new LLC with the three of us on it. But we're all under "this is working fine for us" inertia.
My question is, should I myself set myself up as something more formally than a Schedule C?
The fundamental reason I ask this is I know that the IRS looks dubiously on "self-employed" who consistently have only one revenue source, which I do. My 1099 income from Adam is my only source of earned income, and will likely continue to be so (obviously, the income to Adam is generated by work we all do for our clients - but the invoicing is done by Adam, who receives all our income and pays all our expenses).
With that, and other considerations, and I admit I don't know many of the nuances of the new tax law, what recommendations could be offered for me, and what would the reasoning be behind them?
We're in New York state, but not in NYC or another area with its own local tax jurisdiction.
Our managing partner was in business alone, as an LLC, and the other friend and I joined him a year and a half ago.
For the sake of the discussion I'll call the managing partner Adam and the other friend Bill.
We don't have a formal partnership agreement. Just a written revenue and expense sharing agreement.
Bill has his own LLC and Adam pays Bill his net share of revenue less expenses.
I just file a Schedule C, and, as with Bill, Adam pays me my net share of revenue less expenses.
There will likely be some tax benefit Adam will realize with the new-for-2018 pass-through income rules, and he will share that benefit with Bill and me.
I know that optimally, we should form a new LLC with the three of us on it. But we're all under "this is working fine for us" inertia.
My question is, should I myself set myself up as something more formally than a Schedule C?
The fundamental reason I ask this is I know that the IRS looks dubiously on "self-employed" who consistently have only one revenue source, which I do. My 1099 income from Adam is my only source of earned income, and will likely continue to be so (obviously, the income to Adam is generated by work we all do for our clients - but the invoicing is done by Adam, who receives all our income and pays all our expenses).
With that, and other considerations, and I admit I don't know many of the nuances of the new tax law, what recommendations could be offered for me, and what would the reasoning be behind them?
We're in New York state, but not in NYC or another area with its own local tax jurisdiction.
Federal Taxes: Self-Employed - Should I "Move Up" from Schedule C
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