Reprint Guidelines:
** Attention Ezine editors / Site owners **
Feel free to reprint this article in its entirety in your
ezine or on your site so long as you leave all links in
place, do not modify the content and include my resource box
as listed below.

If you do use the material, please send me an email so I can
take a look: mailto:Wayne@YouSaveOnTaxes.com

============================================================

How To Avoid Double The Trouble:
Why A Partnership Can Be Twice As Dangerous 

-- by Wayne M. Davies

Copyright 2003 Wayne M. Davies Inc.

============================================================

AUTHOR'S NOTE: This is the second in a series of articles
on Choice of Entity. The first article, "It Could Happen
To You: Why Any Sole Proprietorship Is A Risky Business",
is at http://www.YouSaveOnTaxes.com/happen-to-you.txt

Let me introduce you to another client of mine, let's call
him Tony.

Tony is a computer programmer who always wanted to be
"on his own." One of his co-workers, Kevin, felt the same
way. On their lunch breaks they often talked of the day when
they'd be calling the shots and making all the money.

Before long, they got the guts to tell their employer they
were quitting to start their own business. They didn't know
much about paperwork, but Tony's brother-in-law, Kyle, who
worked for an insurance company, always seemed to know a
lot about "how things worked" in the business world.

Kyle told Tony that the business didn't need to do anything
fancy to operate as a business. They could just run things
as an informal partnership -- they each contributed 50%
of the start-up funds and they agreed to share equally
in the profits.

When it came to bookkeeping, Kevin's wife Jennifer agreed
to take care of things. She was a bookkeeper at her regular
day job and so that was fine with Tony.

The business took off and within a couple years Tony
and Kevin were making more money than they ever made
as employees. In fact, the partnership had to hire
several employees to handle all the work.

Tony thought things were going fine until Kevin showed
up at a job one day drunk as a skunk. A few weeks later,
Kevin literally disappeared, never to be heard from again.

Turns out that Kevin, with his wife's help, had been robbing
the business blind. Kevin had a drinking problem that he
was able to hide from Tony. He was also able to hide that
fact that the money he was stealing should have been used
for payroll taxes. The partnership was now $18,000 behind
in payroll tax payments.

Kevin and Jennifer were nowhere to be found.

And Tony was stuck with the bill from the IRS for $18,000
in unpaid payroll taxes.

How could this be? Because in a General Partnership,
both partners are liable for the debts of the partnership,
regardless of who might be originally responsible for
binding the Partnership.

Each partner is personally liable for the debts of the
Partnership, and each partner can be held responsible
for the business-related actions of all other partners.

It doesn't matter that Kevin was handling the books and
the payroll tax payments. It doesn't matter that Kevin was
stealing from the Partnership.

Kevin was gone. And Tony was left holding the bag.

The IRS went after Tony even though he had nothing to do
with Kevin's wrongdoing. Because he was a partner, he was
liable for the debts of the Partnership and had to pay the
payroll taxes out of his own pocket.

Tony had to cash in his retirement plan to pay off the IRS.

So, from a liability standpoint, the General Partnership is
identical to the Sole Proprietorship: the owners have
unlimited liability, and all their personal assets are
at risk.

From a liability standpoint, in a 2-person Partnership,
you could say that a General Partnership is at least two
times more dangerous than a Sole Proprietorship.  In a 
3-person General Partnership, your liability exposure
is three times greater than a Sole Proprietorship.

If you are a partner in a Partnership, do you realize
how much risk you are assuming?

Bottom Line:

If your business is a General Partnership, you need to
incorporate because all your personal assets are at risk,
and your personal assets are at risk not only for your
own actions, but also for the actions of all your
co-partners, whether you like it or not.

Make the move from the world of Unlimited Liability to
Limited Liability.

============================================================

Wayne M. Davies is author of the new eBook,
"Incorporation Tax Secrets Revealed:
The Ultimate Small Business Tax Reduction Strategy"
http://www.YouSaveOnTaxes.com/incorp

===========================================================

Title:
How To Avoid Double The Trouble

Author:
Wayne M. Davies

Author email:
Wayne@YouSaveOnTaxes.com

url:
http://www.YouSaveOnTaxes.com/double-the-trouble.txt

autoresponder:
double-the-trouble@YouSaveOnTaxes.com

word count: 525

character width: 60

keywords: 
incorporation, incorporate, corporation,
partnership

20-30 word description:
A partnership can be twice as much trouble as a Sole
Proprietorship.

Author bio:
Wayne M. Davies is a Tax Professional serving small business
and self-employed clients in Fort Wayne, Indiana. Wayne has
been helping his clients reduce their taxes for the past 15
years.  Wayne provides a complete line of accounting,
payroll and tax preparation services for all business types:
sole proprietorships, partnerships, corporations and LLC's.

He is author of 2 tax eBooks for small business owners and
self-employed people:

"The Tax Reduction Toolkit: 29 Little-Known Legal Loopholes
That Will Reduce Your Taxes By Thousands"
http://www.YouSaveOnTaxes.com/toolkit

"Incorporation Tax Secrets Revealed:
The Ultimate Small Business Tax Reduction Strategy"
http://www.YouSaveOnTaxes.com/incorp

Resource box:
Wayne M. Davies is author of the new eBook,
"Incorporation Tax Secrets Revealed: The Ultimate
Small Business Tax Reduction Strategy" 
http://www.YouSaveOnTaxes.com/incorp

Feel free to substitute your affiliate link in place of my
link in the resource box.

Earn 50% on every purchaser you refer.

Affiliate details are available here:
http://www.YouSaveOnTaxes.com/affiliate.html
http://www.YouSaveOnTaxes.com/ap-its.html