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general partnership taxation vs sole proprietor taxation.

by hed, Window Shopper

  • Created: March 19, 2013, 9:08 pm
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4 comments
I'm looking into setting up what I guess would be a hobby business from home. But I am stuck on wheather to go with a sole prop and do it on my own. Or a general partnership with my spouse so he can be more involved with the business than occassionally volunteering. I have been told more than once that a general partnership has more comlicated taxes than a sole prop and we will end up paying more/higher taxes. And that I should stick to the sole prop. but when i looked up the two the general partnership didn't seem as different as I thought. But I am still unsure that I am fully understanding the difference. I understand to a point about them both being "pass through taxation". What I want is to choose the best option for us. if the taxes of a general partnership is essentually the same as the sole prop, I would like to involve my husband. But if it would cause more trouble for Him or both of us (he already has a full time job) then I will just run the business on my own as a sole prop. I guess what I need is a side by side compariosn/explanation of the taxation of the two for a complete dummy. :) if anyone could help me understand the differences I would be greatful :) thanks.
Tags: Discuss Popular Topics, Filing and Paying Taxes
‹ Do I need to file small business taxes if I have not actually launched the business yet (just registered the LLC)? Independant Contractor ›

hed | Window Shopper | 4/5/2013 - 3:34 pm

Thank you. Our main concern is we would need to use his personal checks to
pay for the filling of paperwork anyway. And we were not sure if that would
cause complications at tax time if he wasn't on the paperwork but had paid
for it.
Also we were thinking of using his photography as well as my art work and
designs. I assumed it just being me he couldn't promote his work under our
business unless it was joint.

JGabriel | Community Moderator | 4/10/2013 - 3:56 pm

Show Replied Text…
Thank you. Our main concern is we would need to use his personal checks to pay for the filling of paperwork anyway. And we were not sure if that would cause complications at tax time if he wasn't on the paperwork but had paid for it. Also we were thinking of using his photography as well as my art work and designs. I assumed it just being me he couldn't promote his work under our business unless it was joint.
Hi there, it may be best to reach out to a professional, such as an accountant, to  help answer your questions. 

kmurray | Community Moderator | 3/22/2013 - 1:49 pm

Hi, Here's some additional information about the various business structures as well. Best of luck!

BizResearcher | Window Shopper | 3/20/2013 - 11:23 am

Creating a general partnership for a hobby business may be too much at this
point. You would need to have an attorney create a legal partnership
agreement and each of you would have to file a tax return for your portions
of the partnership income.

As a sole proprietorship, you can file only a Schedule C with your personal
taxes to indicate income and expenses for the business. If the business is
successful, you can always create a legal partnership later.

The method in which you register the business shouldn't impact your husband's
involvement. If he is willing to help you create a successful business, that
is what is important, unless there is some underlying issue that causes him
to not want to be involved unless he is a full partner. If that is the case,
then you need to contact an attorney and have her/him create a legally
binding partnership agreement.