ILLMAS Posted January 29, 2016 Report Share Posted January 29, 2016 I have a client that was approached by a long time costumer about opening another restaurant, so the agreement is that it will be a 50/50 ownership, split all cost to startup the business etc... My client will train employees and will be on call if a cook doesn't show up, but here is my question. Client will not be an employee, he would like to earn a monthly commission on the sales for the use of his business name (established business) and his family recipes, could this be possible if he is an owner? Thanks MAS Quote Link to comment Share on other sites More sharing options...
Lion EA Posted January 29, 2016 Report Share Posted January 29, 2016 Is it a partnership? Guaranteed Payment. Corporation? I guess he could explore licensing his business name and family recipes to the corporation with a good attorney. Or, franchising. 1 Quote Link to comment Share on other sites More sharing options...
rfassett Posted January 29, 2016 Report Share Posted January 29, 2016 Almost sounds like a partnership with guaranteed payments. He would not be an employee of the partnership, but his pass through earnings would be subject to self employment tax. Quote Link to comment Share on other sites More sharing options...
easytax Posted January 30, 2016 Report Share Posted January 30, 2016 Isn't this something like a royalty? I worked with an engineer who outside work received a patent that he then "licensed" to our employer and they were totally separate payments. One does not affect the other. Would this not be the same, he is doing a separate and distinct offering from the business. Also, just like Paul Newman did with popcorn -- he licensed his image, name, etc. and was NOT (as I can find) an employee, even though an "owner" too. Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 31, 2016 Report Share Posted January 31, 2016 How are they going to set it up? LLC taxed as 1065? Easy if they do that, GP reported on the K-1. 1 Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted January 31, 2016 Report Share Posted January 31, 2016 On 1/29/2016 at 10:08 AM, rfassett said: Almost sounds like a partnership with guaranteed payments. He would not be an employee of the partnership, but his pass through earnings would be subject to self employment tax. I gotta agree with this one, certainly sounds like a partnership with guaranteed payments to me. I don't think this would considered royalty income either. The OP stated there were two people "splitting 50/50" the startup expenses which makes it a partnership. I do agree with KC as well the easy way to do this is an LLC taxed as a 1065 filer. 1 Quote Link to comment Share on other sites More sharing options...
mcb39 Posted January 31, 2016 Report Share Posted January 31, 2016 I have such a situation. Father and Son are partners. Draws to them are either Personal or GP if the money is based on a sales condition. Other son is not a partner but does the majority of the selling. His payments are Commissions and taxed as SE because his payment is based on his actual sales. No sell; no pay! (Filed as an LLC Partnership 1065) Quote Link to comment Share on other sites More sharing options...
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