Your clients are expressing interest in forming a partnership to sell rare books through bookstores across the county. They are not aware of the complexities concerning partnership tax. Chose two to three areas of partnership tax (e.g., basis, contributions, accounting periods, accounting methods, gain recognition and/or losses) and explain to your client how they may apply to their situation.
A partnership firm is a group of persons who contribute their investments either in equal amounts or in percentage basis. The liability of partners in the firm is unlimited, i.e., in case of losses the partners need to bear their 100% losses. A partnership firm is formed on the basis of a deed to be registered with the concerned authorities mentioning the roles, share %ages of partners, new joining and retirement and winding up conditions etc. The deed itself act as a constitution for the activities of firm. The partners need to contribute based on their interests either in cash or kind like cash, buildings, movable assets etc. However, the firm does not pay tax on its whole income but to be paid on the profits it earned and passes to its partners. Partners need to show their share of profit and tax paid in their annual tax returns. The accounting periods for showing the profits or losses are similar to the other business forms i.e., companies.
The clients can farm as partners and contribute their share as cash, books, vehicles, computers, or buildings etc. They have to write a deed mentioning their share of profit or loss. If they want to get an interest on their investment they can also mention the rate of return in the deed. They are the owners of the firm and pay tax on their "distributive share" of the firm's taxable income, even if no funds are distributed by the firm to the partners. The losses or gains are recognized on the basis of transactions of selling the books or renting the books and the relevant expenditure there on. The transactions are to be locked within the accounting period i.e., January to December or April to March etc.
Your clients are expressing interest in forming a partnership to sell rare books through bookstores across...
Please read the article and answer about questions. You and the Law Business and law are inseparable. For B-Money, the two predictably merged when he was negotiat- ing a deal for his tracks. At other times, the merger is unpredictable, like when your business faces an unexpected auto accident, product recall, or government regulation change. In either type of situation, when business owners know the law, they can better protect themselves and sometimes even avoid the problems completely. This chapter...