Business entities are kinda designed to solve this problem.
If you don’t want to go that route yet, I would just draft up a simple agreement that lays out what you want. You operate the business under your name, and your partner sends a monthly invoice for their share of the profit. Their invoice will be an expense for you offsetting your taxes so it all works out evenly in the end. After filing your tax returns you will get the 100% accurate number which you can use for any adjustments that need to be made.
It does require a high level of trust, but I think that’s the cost of saving money on not setting up a proper structure.
Once the business gets going and the model is proven, you can set up a proper entity.
If you don’t have the trust to take this informal approach, then I would reconsider becoming business partners. If you still do, then you definitely want a proper company structure with all the protections it provides you.
Business entities are kinda designed to solve this problem.
If you don’t want to go that route yet, I would just draft up a simple agreement that lays out what you want. You operate the business under your name, and your partner sends a monthly invoice for their share of the profit. Their invoice will be an expense for you offsetting your taxes so it all works out evenly in the end. After filing your tax returns you will get the 100% accurate number which you can use for any adjustments that need to be made.
It does require a high level of trust, but I think that’s the cost of saving money on not setting up a proper structure.
Once the business gets going and the model is proven, you can set up a proper entity.
If you don’t have the trust to take this informal approach, then I would reconsider becoming business partners. If you still do, then you definitely want a proper company structure with all the protections it provides you.