Splitting profits with a partner

[frank6013]

Hello all, I’m looking for a little advice. I just purchased a storage unit full of smalls with a partner to resell on eBay. I’m trying to figure out the best option for splitting profits. Previously we have sold stuff together and I just simply ran it through my account and gave him half the profit a couple weeks later once everything was shipped and cleared. With the new tax laws and the large volume of items we plan to list I’m worried if I do it the same way I’m going to get hammered next tax season. Does anyone have any advice on how to split the profits so we each only get half the taxable income? I’ve looked into LLC’s a little, eBay recommended a joint bank account (which I don’t love the idea of), am I over thinking it? Any advice is greatly appreciated

[slippinjimmy]

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@frank6013 wrote:

It will all be going through one eBay account. I’m debating opening an eBay store account instead of using my personal account like I have in the past, but either way it will all be on 1 account

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There is no connection between a Store / no Store and a personal or business account.

Personal sellers can have a store or not, business sellers can have a store or not.

You can open a brand new account if you wish but it won't change anything except that your new account will have low limits and payment holds to start.

[maxine*j]

When you're considering your options, please keep in mind that: 

With a joint checking account, either person can withdraw all the funds in the account at any time, without consultation with the other person.

In a partnership, each partner is liable for the actions of the other.  In a partnership, there is unlimited liability for debts.  Each partner is "jointly and severally’" for debts, too.  That means each is liable for his own share of the debts, plus he is also liable for all the debts of the partnership.

Partnerships are pretty scary, to me.

Don't any anything without a lawyer.  Really, as much as well like to joke about them, they'll save you a ton of grief for a small amount of money.

=

[bashort]

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@frank6013 wrote:

We split the lot 50/50 and agreed to split the work and profit 50/50. I don’t think it would put me into a different tax bracket (although I don’t know that much about tax laws to be honest) but from my understanding I would still have to pay a certain percentage of the revenue 

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This type of entrepreneurial enterprise is not favored by the powers that be, they would much rather that you check all the government programs to see what free government money that you qualify for and stay on the couch.

[slippinjimmy]

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@maxine*j wrote:

When you're considering your options, please keep in mind that: 

With a joint checking account, either person can withdraw all the funds in the account at any time, without consultation with the other person.

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Any joint account can be set up to require BOTH signatures for any type of withdrawal.

[onlinecentral]

My friend and I had bought a few lots, split the merchandise and sold it on our separate selling accounts. These purchasing deals never damaged our friendship. We shared what we were learning including eBay rules, selling software, photography and HTML to build descriptions.

On his own, he bought he bought items in saturated categories that sold poorly. Not the type of person who could develop a flair for what sells. He hasn't sold anything for a decade.

I went on to ship 26,412 packages lifetime.

You should abandon the idea that you should be equal partners in a registered business right away. You can move forward with that incorporation in a few years if your partner impresses you with their audition.

[onefootflipper]

You can pick items with a friend, split lots with a friend. But the last thing you want is to actually go into a real business with a friend. These things never end up equal, either in work done or skills brought to the table. Fact is one partner will end up doing more of the work than the other and one partner will also bring more relevant skills than the other. It is also most likely for both of those to be the same person. Either they are going to hold you back or you are going to hold them back. Even if somehow both of you bring equal skills and effort you will be less efficient simply because of all the decisions you will have to talk through.

You are far better off doing as much as you can on your own until you absolutely can't handle more and then hiring an employee than you are partnering up with anyone.

[sin-n-dex]

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@frank6013 wrote:

Hello all, I’m looking for a little advice. I just purchased a storage unit full of smalls with a partner to resell on eBay. I’m trying to figure out the best option for splitting profits. Previously we have sold stuff together and I just simply ran it through my account and gave him half the profit a couple weeks later once everything was shipped and cleared. With the new tax laws and the large volume of items we plan to list I’m worried if I do it the same way I’m going to get hammered next tax season. Does anyone have any advice on how to split the profits so we each only get half the taxable income? I’ve looked into LLC’s a little, eBay recommended a joint bank account (which I don’t love the idea of), am I over thinking it? Any advice is greatly appreciated

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For a successful partnership, one person needs to be in charge, both parties need to agree on how things are done. If you are in charge, you take custody of all inventory, do all listings and all shipping, and do it on your own eBay account. You don't want to sell anything you don't have custody of (which can be in the storage unit). You do the bookkeeping and share  your records with your partner, and write their share on a cheque, keep a record of all cancelled cheques for tax time.

My friend runs a B&M store and gives me merchandise to sell. I'm in charge. It's my ebay account, i decide what gets listed and for now much, I ship everything (although I have so much stuff it's stored in the shop, but I have access to my inventory any time I need it), I collect all the money, keep the records, and write the cheques. The B&M store's responsibility is to tell me how much they paid for stuff so I can determine if it's worth my while to sell it for them. We keep track of all these costs because the B&M store's cost is covered first (along with eBay fees, shipping, etc), and when we determine what all the costs are, we have an agreed split on the profits.

It's not usually a good idea to do business with friends... while I'm friends with the shop owner, we don't have a social relationship outside of the store or get involved in any other things that might taint our business relationship.

C.

[maxine*j]

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@slippinjimmy wrote:

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@maxine*j wrote:

When you're considering your options, please keep in mind that: 

With a joint checking account, either person can withdraw all the funds in the account at any time, without consultation with the other person.

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Any joint account can be set up to require BOTH signatures for any type of withdrawal.

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Yes, it can be.  But in partnerships it usually is not.  That has to do with the "jointly and severally" liability;  or, at least, that is my understanding.  Business partnerships are just scary.  LLCs make a lot more sense.  Everyone needs a lawyer, no matter how the business is set up, though. 

I like the idea that others have put forth:  For now, just split the stuff that was bought and each sell half on his own account, see how things go, take it from there.

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[simply-the-best-for-you]

If you decide to get a bank acct, look into getting a Tenants in Common acct, rather than a joint acct.  Tenants in common allows 2 (or more) people to own a portion of the same asset, such as real estate, a bank account, etc.  The parties define what percentage each owns.  It also allows for each person to have different liquidation if there's a death. 

It's been a really long time since I worked with them though & I do not remember if there are 2 ssn's or TIN/EIN.  I believe there are & so it could resolve that part of it.   Like I said, it's been a really long time so do some reading & or talk to your bank.  Any bank would do it, it's not special, it's just a different type of ownership. 

[7606dennis]

I recommend that you consult a tax professional.

[kathieskorner]

If you are using your account and keeping all records -  you are doing more than 50/50 while bearing all the risk.  I don't know your ages,  but what happens if one of you gets sick or has to deal with one of life's curve balls??   You are far better splitting the inventory and using separate ebay accounts especially if you haven't

handled a large volume of items together before.   I think the new tax laws could be the least of the problems you may encounter. 

[luckythewinner]

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@frank6013 wrote:

Any advice is greatly appreciated

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I have two simple solutions:

Option 1 - split the inventory, not the profits. Take turns choosing 1 item each until it is all divided, just like picking teams on a grade school playground. Then you each sell your own stuff. 

Option 2 - convince your partner to sell the stuff on your partner's eBay account, and let your partner deal with everything. 

How did you handle the taxes when you did it before? 

[coolections]

Are you talking abut going into business with this person full time? You said you purchased a storage unit which is obviously not enough merchandise. You will need to purchase 100 storage units. Ebay is a great selling venue but as a start up business I would think your plan through very carefully. There are so many things that can go wrong.

[soh.maryl]

Why do you infer that the OP is on some kind of government assistance when he simply inquired about a type of partnership? 

[frank6013]

I'm not sure what that post was referring to either. I'm not on any kind of government assistance, nor do I qualify for any either. I have a full time day job, this is just a side gig to make a few extra bucks. I'm assuming he was simply trolling.