# Sole Proprietorship or Partner ship?



## mattsop (May 20, 2009)

I'm in the process of starting a screen printing/DTG business. I'll be purchasing the printer in the next month. My question is this:

I have two friends who want to go in on the business with me. What are your suggestions on that?

My biggest concern is whether or not we would be able to make enough for three people to make a comfortable living. Ideally we would make roughly $40k a year each. From my estimations, doing it on my own would take a lot of work, but would definitely be possible. But with two partners we would now need to make $120k a year, profit. We're all three willing to do it full time. Also, we'd be doing graphic design and full color printing (anything we could outsource).

I go back and forth with the idea myself. If I do it on my own, I'd have more control and the business wouldn't have to make quite as much for me to profit what I want...But, having the help of two others would be nice. Also, if one of us is ever out of town, the business would still be able to run, having two other partners.

If I do it as a sole proprietorship, and have them help for sales and graphic design, I wouldn't have the funds to pay them a regular wage right now, and it would have to be on commission or per design. But then comes the times when I just need some help running a job, or watching over the shop.

What suggestions do you have?

thanks,
Matt


----------



## Austin300 (May 24, 2009)

I can only tell you what I know from experience with friends and business.


RUN!!!!!!!!!!!!!!!!


Never Ever Ever Ever Ever go into business
with your friends and if at all possible never 
have a partner at all.

Somebody needs to be the boss and it never 
seems to work out.

There are other options and ways to involve
them in the business without having them
be partners.

Friends soon become not so good friends and
it's not worth messing with long term friendships.




Just my 2 cents.


----------



## mattsop (May 20, 2009)

Austin300 said:


> I can only tell you what I know from experience with friends and business.
> 
> 
> RUN!!!!!!!!!!!!!!!!
> ...


This is another thing I've thought about. One thing I'm not sure about are the labor laws. If they're not partners, do I have to pay them hourly, or can I pay them a % of the profits? Anyone know?


----------



## happycolt (Oct 27, 2009)

I believe that depending on what state you are in you can pay them under a contract labor title which means you can just cut em a check up until a certain point. Though they and you will be responsible for filing that appropriately as far as taxes are concerned

Or you could do as I am doing at the current time and not register quite yet (waiting to establish a small customer base and the new tax year) and just have them working with you and split the funds for now. I'd just make it clear to them that you're gonna be running the business and if they don't like it they can work for/with you and you'll pay them as the funds allow but that you're gonna be taking the business on as a LLC (which is what I'd do)


----------



## FarmerLarry (Sep 11, 2009)

You'll need to set up some kind of corporation. C corp, s corp or LLC and you need to watch out for labor laws. You may have to get workmens comp if they are treated as employees. OR you can go on your own and have them sub contract with you. That way all you have to do is give them a 1099m at the end of the year so you can write it off. Only problem is they will have to start some type of business too.

You can always talk with a CPA or Lawyer (best advice)

Larry


----------



## Just In (Nov 27, 2008)

absolutely go it alone and sub-contract out to them. Unless they are bringing huge amounts of cash to the table..there is nothing to consider... 

~just my thoughts


----------



## gearbranders (Oct 16, 2009)

I'd say you should form an LLC and get taxed as a sole proprietorship and outsource to your friends. From what I've been told, you can't just say your friends are independent contractors and give them a 1099. They actually have to *be* independent contractors, which means they need to be providing the same service to other customers. If you control them as employees -- i.e. tell them when to report to work, when to take lunch, how to do their job, require them to work in your space using your equipment -- they can be viewed as employees by the IRS. They really need to be providing the service to multiple clients to be considered independent contractors. Consult a CPA or attorney to verify everything I'm saying.


----------



## drudalton (Dec 3, 2009)

Make sure, even if you go it along (which you should), make sure you set up a corp or LLC to limit your personal liability. 

As for having people to work the shop, that's what employees are for. Maybe you can't afford them right away, but entrepreneurship is give and take. Keep along term focus. It won't happen overnight and probably not in a six months or a year, but it will be worth it with hard work and passion. 

And make sure DTG is a passion of yours. Don't do it for the money, do it b/c you love it.

Let me know if you have more questions, I'm more than happy to discuss.


----------



## uncletee (Feb 25, 2007)

do it alone, partnerships with friends won't work, something always gets in the way. plus very hard for 3 people to make a decent living.


----------



## FarmerLarry (Sep 11, 2009)

> From what I've been told, you can't just say your friends are independent contractors and give them a 1099. They actually have to *be* independent contractors,


In my first post when I mentioned about doing 1099, I also stated they will have to start their own business too. That means business name, insurances, taxes etc...

Ive been a hvac owner/contractor for the last 10 yrs. I have sub contractors and I also am a sub contractor in other areas of work. 1099m are normal and required. 

Ive been looking up LLC and that seems to be the best way to go. Good luck on your quest.
And as I and others have said, talk to a accountant or lawyer about these.

Larry


----------



## Crossbone (Dec 4, 2009)

I agree with everyone else I have a partner in one of my business and he was helpfull at first in the first year then next thing you know I have been doing everything and the only reason I asked him to become a partner was he was a good freind I thought he had the same goals as me and the same drive and determination But I was wrong and now I have a dead beat partner that I feel I have to cunsult anytime I make a decission about the business . It just better in the long run to try on your own if you can do it .


----------

