The Small Business Tax Help Blog

Posts Tagged ‘social’

Question: Adding a 50/50 partner to Start up Business?

Hello all,

About 5 months ago I set up an LLC in the state of Idaho. A friend (in texas) decided to partner with the new business. We haven’t officially started yet. It’s a dotcom business.

My questions to you :

Where do I start as far as paperwork?

Do I go change the LLC first?

Do I need to put him on the EIN paperwork?

Where would I begin as far as legal contracts? What kind would I need?

Do we need to set up a dba, another business address in Texas, or something similar if he is doing the work in Texas and I’m here in Idaho? Or is just having the corporate office in Idaho ok since its an online business? Would it better better to set up an office address there?

I would greatly appreciate any advice/tips. Thank you kindly.

Best,
Jason

Answer: First thing you need to do is reach an operating agreement. Operating agreements govern issues of control, key decision-making, and buyouts of shares if one of you decides/needs to leave the company.

Once you both sign the agreement (don’t leave it unsigned), you can change the LLC.

I’m not an attorney but I doubt you need to set up separate corporate entities, unless there is a tax reason to do so. For example, Texas has no income tax.

I strongly recommend you do not do this alone. Hire an attorney who works for you. Your partner should do the same. A couple thousand bucks’ investment now can save you from much more losses down the road.

Unsolicited advice – 50/50 relationships are very tricky. When you disagree, you can paralyze and kill the company. In some states, when you have a true impasse, a judge can force the dissolution of the company.

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Question: Do I need an EIN for a charity fashion show?

I looked over the IRS website but it didnt give me the answer I wanted. I want to organize a fashion show to raise money for St. Jude. The items will then be auctioned off to raise more money. Everyone working the show will be family and volunteers so no worry about paying employees. Tickets to the event will be sold to cover the costs of facility rental, ect. So, do I need an EIN and if so why?

Answer: St. Jude would have an EIN, as an organization. Why not use theirs?

Generally speaking, if you take in money, you will need to keep VERY good books, and even having a separate account.

If St. Jude have any attorney’s on retainer, you may wish to consult him or her.

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