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

[tex-421]

I don’t know what your gross revenue is, but at some point an hour with a tax advisor or tax attorney might be worth your while.

[alcoforever]

Who paid for the lot of smalls?

Who is going to do all the listing, packing & shipping?

What tax bracket are you currently in?

Might the profits push you into a higher tax bracket?

Some grist for the mill.

[dbfolks166mt]

     As suggested by zip-a-deedoodah  a tax advisor or better yet a lawyer would be the best avenue. EBay's advice as usual is pretty useless even with a dual bank account, without a LLC or business arrangement only one SSN is going to log all of the revenues from the sales. There is no simple solution to this if you set things up the proper way as either a partnership or a business corporation. 

[frank6013]

That’s a good idea, I’ll look into finding someone to talk to about it

[frank6013]

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 

[genv]

Two ideas:

1. Pay him by check, deduct checks as COGS (cost of goods sold).

2. Pay him by 1099, deduct that, (form available on IRS website).

[frank6013]

Yea from what I’ve been looking into I think an LLC might be the route I have to go but I think talking to a tax advisor or lawyer might be a good idea

[dryophelia]

@frank6013 

Will you each have separate accounts for selling or is it all going through one eBay account. 

[slippinjimmy]

You can basically do the same thing.........

The gross goes on your 1099, you deduct expenses, one of the expenses would be the "commission" you pay out to your "partner".

Another way, create a partnership, get an EIN for the partnership and use that for eBay, partnership gets the 1099, you produce an Income Statement and divide the net profits as you wish and each individual reports their share.

There are probably several other ways you can do it but your stumbling block is that on an eBay Personal account you can only have one tax ID (I suspect, not sure that it needs to be a SSN or ITN) If you convert to a business account you may be able to use an EIN. I can't say with certainty that the info in this paragraph is 100% accurate, you will have to research on your own.

[frank6013]

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

[frank6013]

I wasn’t aware of either of those options. I’ll look into them. Thanks!

[silverstatetreasureboxes]

@frank6013 

LLC is the way to go with you and your friend. This might turn into an adventure and you two may want to branch out into estate clean outs and more storage units! Sounds like fun to me! Believe you can pick up a form at your city hall, good luck!

[onefootflipper]

Honestly, if you don't want to ruin your friendship then don't do it. Just split your lots down the middle and each run your own accounts. Someone will end up doing the lion's share of the work, side things like this that need daily attention never end up even.

[1786davycrockett]

I'm with dryophelia's inference-- each of you should create a separate eBay selling site, and divide the items between the two of you for sale on your own separate accounts.

That way, both of you will be subject to the new lower 1099-K thresholds (rather than just you alone, as before), and both of you will reap the benefits (or regrets!) of selling on-line, as well as being able to take advantage of the deductions of operating a business.

There is absolutely no viable reason any longer for any one person to be held taxably responsible for a jointly-operated business.

And, in case the partnership should fail, both of you are covered.

Good luck!