Partnership question ?

[cowboy43]

My son and I are going into a partnership on cattle( buy bred cows to resale) on some rental land I have, which on our part a hand shake would be a good enough contract for us. We have borrowed the money to do this( on our name) and open a bank account on the operation , to keep all monies separate from our personal accounts, But for tax purposes, how is this done, does a legal business contract need to be filed, I know I will probably have to go to an attorney or tax preparer at some point, but I thought maybe some of you have a partnership with someone and might have an answer.

 

[Tom in TN]

Cowboy43,

My son, daughter-in-law, and I have a partnership on our farm operation. We drew up an agreement that simply states what our intentions are and how we are going to operate. We acquired a Federal Employer Identification Number (FEIN) on-line from the Feds at no cost. We file a Form 1065 Income Tax Return each year, and part of that is to create a Form K-1 for each partner showing that partner's share of the profit or loss for the year. You don't pay any income tax on the Form 1065, instead, the individual partners simply include the K-1 profit or loss on their individual Form 1040 tax returns and pay income tax accordingly.

We have an annual partnership meeting that we document just for the sake of having a formal organization in case the IRS ever audits us. I do the accounting for our partnership using a computer based accounting application that is now called Sage 50 Accounting, but my copy of the program is old enough that it is called Peachtree Accounting. We try to run the operation as professionally as we can.

There are advantages and disadvantages of every type of business organization, but a partnership works for us.

Tom in TN

 

[cowboy43]

Thanks Tom that looks like something we can work with, I knew their was someone out their that could help me.
Thanks again
Donnie

 

[Sir Loin]

43,
Re:

My son and I are going into a partnership on cattle( buy bred cows to resale) on some rental land I have, which on our part a hand shake would be a good enough contract for us.

That’s what you think.
I would highly recommend you not do this, especially with a relative.


If this is the only way you can to get in the cattle business, then for sure do it as a LLC and have every agreement in writing and signed by both parties involved. . ( Limited Liability corporation ) Attn cost around $500. It could be the best money you ever spent.
SL

 

[cowboy43]

Sir Loin
I knew when I posted this their would be such responses , not to go in partnership with relatives. I respect your opinion and I agree with you on most occasions. I am 68 yrs my son is 40 yrs , I have been in the cattle bussines since I was 18 yrs old, when my father died , my son was in the business when he was 20 yrs old, he lives on the ranch with his family and has an outside job. He has helped me his whole life and never asked for a penny of pay. he turns it away when I try to pay him. He sold his cows out some years back , the operation is getting to be more than I can handle and I see this as a way to help him get back in business and pay him back his labor. I am not a rich person but I will turn the partnership over to him when the time is right. We have an unwritten bond between us , trust and honor of each other , the ole cowboy way. I kown a lot of people will not understand this , but that is the way we live, and their is afew of us left. :cboy:

 

[Sir Loin]

cowboy43

Well God has certainly blessed you and yours and I wish you and your son and grandchilden and great crandchildren ( get my point ) all the best.

But here is what you or your son may not have any control.
They are called ex wives who want more then their share. You can never know what is coming down the road say 5 - 10 or 20 years. With out an LLC you both could lose all of it.
Please talk to an attn for the good of all involved.
Best luck
SL

 

[snake67]

Sir Loin
I knew when I posted this their would be such responses , not to go in partnership with relatives. I respect your opinion and I agree with you on most occasions. I am 68 yrs my son is 40 yrs , I have been in the cattle bussines since I was 18 yrs old, when my father died , my son was in the business when he was 20 yrs old, he lives on the ranch with his family and has an outside job. He has helped me his whole life and never asked for a penny of pay. he turns it away when I try to pay him. He sold his cows out some years back , the operation is getting to be more than I can handle and I see this as a way to help him get back in business and pay him back his labor. I am not a rich person but I will turn the partnership over to him when the time is right. We have an unwritten bond between us , trust and honor of each other , the ole cowboy way. I kown a lot of people will not understand this , but that is the way we live, and their is afew of us left. :cboy:

Bought my last peice of land that way - made payments to the family down the road for three years - nothing on paper. When I made the last payment, they signed over the deed.

All done on the handshake and over coffee one morning.

Not a lot of people understand that my friend.

You be safe and have a great day

Bez

 

[highgrit]

It's sure nice to run into honest people. Nothings better than a good handshake before and after a deal. Cowboy, being he's your son I would not worry to much, but ex wives are nothing but trouble. But you and him need to worry about the IRS, just make sure your ducks are in a row.

 

[Sir Loin]

Re:

All done on the handshake and over coffee one morning.
Not a lot of people understand that my friend.

I remember those good old days too and have done many many deals on a hand shake.
But into days world were you have to carry a lawyers card in your pocket because every Tom DICK and Harry is trying to get fixed for life by suing someone, it is getting to were something this important needs to be put in writing.

More then once I have seen dad die ( Intestate ) and relatives come out of the wood work looking for a piece of the pie, that the son didn’t even know he was related to. Are you positive you don't have any 1/2 brothers or sisters?
SL

 

[Commercialfarmer]

But here is what you or your son may not have any control.
They are called ex wives who want more then their share. You can never know what is coming down the road say 5 - 10 or 20 years. With out an LLC you both could lose all of it.
Please talk to an attn for the good of all involved.
Best luck
SL

I have to agree here, saw this in action. Some body didn't cross a t or dot an i on a divorce and the family who operated the farm had to buy it all over again. There is very little just about our justice system.

Bought my last peice of land that way - made payments to the family down the road for three years - nothing on paper. When I made the last payment, they signed over the deed.

All done on the handshake and over coffee one morning.

Not a lot of people understand that my friend.

You be safe and have a great day

Bez

It is refreshing to see people keep their word. You can't do that in the populated areas, people just turn into rats and would stiff an orphan. I have a ton of stories on that. Wish you could still hang the sum*********'s.

 

[cowboy43]

We just got a Texas Family Land Heritage Award for the land being in the family for over 100 years and that is my next project to put it in an LLC to protect it for future generations, I have 3 sons and families living on the place and none want to sell but as mentioned no one can predict the future and what it will bring, luclily no divorces yet. Thanks again for all your thoughts. :cowboy:

 

[john250]

We just got a Texas Family Land Heritage Award for the land being in the family for over 100 years and that is my next project to put it in an LLC to protect it for future generations, I have 3 sons and families living on the place and none want to sell but as mentioned no one can predict the future and what it will bring, luclily no divorces yet. Thanks again for all your thoughts. :cowboy:

A trusted attorney can give good legal advice, you have to ask the right questions.
Don't put assets like land into a corp or LLC. It can be gods own frustration getting it back.