Re: sole prop or partnership

In article <[EMAIL PROTECTED]>, [EMAIL PROTECTED] 
says...
> 
> Hello-
(explanation truncated)
> 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)?

A sole proprietorship is an individual conducting business. A 
partnership is an agreement between two or more people to conduct 
business together. The rights and responsibilities of each of the 
partners is as agreed to by the partners. This agreement could be as 
casual as your wife saying to her mother "we ought to sell our wares and 
her mother saying "OK". Bottom line, if your wife and her mother engage 
in business together and they do not establish a separate entity 
(corporation, LLC) they are a partnership. I came across a lawyer with a 
web page that describes pretty succinctly business entities, its at:
http://www.rkcaseyesq.com/products.htm

Partnerships are required to file a return on the partnership total via 
a form 1065, split the profit or loss by distributing a K1 to each 
partner with then each partner claiming whatever portion of the profit 
or loss was allocated to them on their 1040.

Anyone or thing that engages in business must file tax returns and 
therefore must keep books. A checking account does not generally 
constitute books - they will need to keep a ledger or get some software, 
etc. to keep track of all money that they take in (revenue) and 
everything that they bought for the business (expenses). Profit or loss 
is what they end up with when they deduct expenses from revenue. As it 
is important to not commingle business and personal funds, they should 
open a separate checking account to create a place for the receiving and 
disbursing of funds. The form of the account will depend on the bank 
that they deal with and their requirements. Many require a written 
partnership agreement and a fictitious name registration to open an 
account under the name of the partnership. Easier is to establish a 
joint account together that they only use for the business. 

HTH

Dave Miller
Strategic Services Group, Inc.
creators of FundablePlans.com
http://www.fundableplans.com
A commercial online tool for the creation of business plans.