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Hi Mark Kohler here with another two-minute tax and legal tip I want to talk about the legal structure for a partnership now this is really really important because there's a lot of options and A lot of people screw this up by just doing a handshake or some sort of deal Via email and so I want to give you two or three ideas and the best way to structure your partnership first Let's talk about the basic joint venture agreement Now this can be a little dangerous because it would be considered a general Partnership and both parties could be personally liable for an any action of the other that's usually not the best structure for asset protection But at least it gets the deal started in it and bare minimum. I want you have a quality joint venture agreement Sometimes loosely you can call it a partnership agreement a lot of people Claud a JV agreement where you could have two people with this JV agreement agree to do a project together and What's cool in fact one of the parties could be an entity like an S? Corp and the other one could be a person the other one could be an LLC it could be to Market something on the web. It could be something to do with real estate, but it's called a joint venture agreement typically two to three pages and it memorializes the agreement between the parties folks Please do not do your partnerships on a handshake start at least with a joint venture agreement? Number two and you knew I was going to say it, it's the limited liability company the LLC This is a phenomenal structure because it's so flexible and easy to allocate partnership profits voting rights all that good stuff we love the LLC for this but an LLC beacon can be used in two different places so the second tip here is using an LLC to hold property an LLC where you might hold real estate or an apartment complex or a Development of some sort this is an LLC used for holding assets Now this is a very unique LLC in the sense it's like a holding company and Typically you might have an individual's trust as an owner or another LLC that's kind of a parent company for multiple. LLC's and Holdings This LLC should be set up in the state where you're doing business watch some other videos on that issue But this is a holding company LLC and perfect when you're holding assets Have a good quality operating agreement and checkbook for that type of relationship with a partner now number three I want to talk about an operational partnership, so you're running a business think of this as the building now Here is the restaurant this could be the development. This is the rental so you've got all these different operational aspects of selling a product or a service and typically again We're gonna lean on an LLC now. That's not in every state but generally That's where you're going to start, but we don't want to pay self-employment tax on this ordinary income We're producing in these operations, and so we need to involve a S corporation And this is where the individual owners of an LLC might be their own S Corp where they can do all sorts of their own individual tax planning save on self-employment tax But have an operational partnership in a form of an LLC separate from an LLC. That's a holding LLC Love this these are three options that can help you structure your partnership to stay out of hot water And get better tax planning watch them my other videos on these topics to continue education on ways to better live your American Dream Thanks for listening, and I hope that information was helpful and let me speak from the heart here I've been talking about topics like this for 10-15 years I'm a CPA attorney best-selling author radio show host and I am passionate About helping small business owners save taxes build wealth and protect it. Please check out the link right here Download my free ebook on 10 Common mistakes small business owners make in the tax and legal arena. Also check out my social media links here I've got daily tips a weekly blog Radio show every week this information is free and I'd love to help you click below find out more about me and thanks for listening