Taxes with a Partner

[Liam Hanlon]

Hi All,

In the process of buying my second duplex this calendar year. Have done both deals with a close friend and partner under an LLC.

I'm looking for any tips/ tricks/ resources that will hell me navigate the best practices of submitting taxes with a partner under an LLC.

Thanks!

[Michael McLeskey]

There are lots of things to consider, but I'll just name a few things that can point you in the right direction.  1.  Whether you know it or not for tax purposes you've got a partnership.  That means you'll have to file a separate partnership tax return.  Both you and your friend will ultimately split the income/ deductions on this so you can prepare your personal return.  2.  Is this a true 50/50 partnership?  Did each of you contribute the same amount to the partnership and therefore are entitled to split the income/ deductions accordingly?  3. If you are not sure about #2 it would be a good idea to have an operating agreement that spells out how you are supposed to treat taxes, legal matters, exiting the partnership, etc.  Partnership taxation is a tricky world but that doesn't mean your filing has to be that way.   Having a clear understanding of some of the basics will go a long way in terms of not only getting the filing done but making sure the communication between you and your partner is clear.   However, if you start adding other partners, contributing unequal amounts of capital, your filing will get complicated fast and should indicate it's time to get professional support.