Re: sole prop or partnership

"Troy" <[EMAIL PROTECTED]> wrote in message
news:[EMAIL PROTECTED]
> Hello-> My wife and mother-in-law are going to start a sewing business.
They will> work out of the home and will basically split all profits 50/50.
To start,> they are just going to make a few things and sell to a local
store or sell> the products at craft shows.>
> They don't want to incorporate or anything yet to reduce the cost of
startup> to practically 0 except for fabric and thread costs as well as to
see if the> products will sell.> > My questions are these:>
> Can a Sole Proprietorship exist with 2 people splitting the profits?
What> is the difference in between a Sole Prop. and a Partnership?  Is a
> partnership more appropriate in this case?> Also, how is the best way to
maintain expenses?  A separate checking account
> just for the business?  Do we open that in their names or in the name of
the> business?  When reporting taxes, do you only report the profits?  What
about> the profits that you turn around and reinvest into the business (like
buying> more fabric in this case)?>
> Thanks a lot!> troy
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Dear Troy,
I suppose survival of a biz is like any other biz.  I have been surviving on
a loss for 2-3 years while I build my customer base, machines and inventory.
I can do this because I am not surviving on the profits of the biz to cover
my living expenses at the moment.  Does your wife and mother in law need the
income that the biz throws? if they do or just have a limited amount of time
to see if the biz becomes profitable, then all I can say is see how long it
takes or see how long they can stand to lose money while growing the biz.
A sole proprietorship is one person with a resale number.  They claim
income, expenses and pay sales tax.  If there is no partnership how can they
split the income and liabilities? Someone has to use a social security
number or another tax number that they apply for for these purposes.
Personally, I am trying to minimize my expenses by not spending on things I
can get around.  I have a separate checking account with my name (not biz
name) and that's totally free so that I can keep track of sales and
expenses.  A biz checking account has a min. monthly fee which goes up or
down depending on money left in the account.  My customers seem not to care
that they make checks out to my personal name.   The start up costs were the
biz license and product materials.  I also have a website that is totally
free from ATT with a low internet access charge that I would pay anyway just
for being on-line.  I also get 6 free email addresses which is fab and one
of them has the name of my company so it looks more professional and people
remember it easily.  I cannot get a www website with ATT because they
support  personal websites not commercial websites but they do not mind if
you operate a business with your personal web space.  I would have to go to
a commercial web provided for a www site and reserve a domain name and that
would cost an additional monthly fee/year fee.
I had unavoidable operating expenses which consisted of computer repairs and
upgrades.  I do travel so I claim mileage and tolls and I am currently doing
print ads to draw people to my website in an appropriate market.
If your wife and her mother are not desperate for income, have a desireable
product and they market and sell properly, they could probably do reasonably
well.
Good luck, Harriet
http://paperandimages.home.att.net