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    5 Replies Latest reply on Dec 22, 2007 9:27 PM by LUCKIEST

    Starting a second business (same partners)

    LUCKIEST Guide
      My partner and I are running a production company now. We want to start a second business.
      This second company will hire artists and do sound work.
      We will be contracting work between both companies.
      My question is, are these services tax deductible between both businesses since my partner
      and I own both businesses?? How do we set up this scenario??
      Thanking you in advance for time and your suggestions.
        • Re: Starting a second business (same partners)
          SCORE108 Wayfarer
          Do you have a good business reason for starting a second business? I ask this because you could perform all of these services as one business. This would eliminate the need for billing for services between tow companies. If your partner and you will have different ownership percentages in each business you could adjust the profit split in one business for this difference or this may be a reason for a second business. If you have two businesses the services between the two would be income to one and a deduction to the other. Be sure you bill the services a market value and not to shilt income from one to the other.
          • Re: Starting a second business (same partners)
            Score133 Wayfarer
            Any time you hire a company to work for a company you own, it is a legitimate business expense (duh) regardless of who owns the other company. The only time you'll have trouble is if you have not completely segregated the two companies from a legal and financial perspective. The benefits of owning another company and hiring it to do business for another of your companies are many, especially if you plan on growing both businesses in different directions. If both companies are providing similar services and will grow in the same direction, you may want to rethink it strictly from a paperwork standpoint. (It's not like Red Lobster gets in the way of Olive Garden; both owned by the same folks.) A good CPA will be your best resource for the segregation of funds and the setting up of books that are accurate and easy to differentiate. Good luck!
            • Re: Starting a second business (same partners)
              KarateKid Newbie
              You'll need to legally structure your businesses accordingly. I believe you can consider the option of setting up a parent company and then have the other companies under it.
              • Re: Starting a second business (same partners)
                instance Wayfarer

                Well, legally, it does not matter how many companies you own because each company is a separate entity, like they are different people.

                You can have Company A that owns 50% of company B and your partner the other 50%, you can have Company A owned by you and your partner, owning company B in a 100%. Or you can both own Company B independtly from Company A.

                Companies are pretty much like people, they can open other companies, they can rent a house, they can borrow money, lend money, they are separate legal entities. You can also have Company A doing business with three different names offering the same service or different services to target different markets.

                Hope it helps! Merry Christmas!!
                  • Re: Starting a second business (same partners)
                    LUCKIEST Guide
                    Also by SCORE
                    h3. 6 Steps to Small Business Success

                    1. Start Smart
                    2. Plan Ahead
                    3. Set up Systems
                    4. Seek out Sales
                    5. Aim for Growth
                    6. Leverage Opportunities

                     

                     


                    1. Start Smart.
                    Identify a niche. Don't compete to be the lowest cost provider. Look
                    for what makes your product or service unique and adds a special value
                    for the client and charge for that value. Every business has many
                    facets. Start with what you know and like; start a business that has
                    meaning to you. Keep in mind that we don't know what the future holds,
                    many of the jobs and businesses of tomorrow don't exist today. You can
                    create your own success.

                     


                    Now is the time to dream. To start smart, you should like the idea of
                    the business. The way to earn a good income and build wealth is by
                    serving clients well, making their life better in some way-it's more
                    than filling a need in the marketplace. To succeed you want to test the
                    idea to make sure your potential clients like the idea too. Test your
                    ideas.

                    2. Plan Ahead.
                    People often ask me why bother with a business plan? Look at the
                    lottery as an example. You may get lucky and get the winning ticket,
                    but the odds are against you when you rely on random chance. I'm a risk
                    taker...but not that much, minimize the risk of going into business and
                    maximize your potential for success. Take the time to write a plan of
                    how you get from point A to point B. A plan gives you a clear future
                    focus and increases your chances of success.

                     


                    The first rule of a start-up is put some of your own money in the
                    business. As the owner you must be willing to capitalize the business.
                    The second rule is put as little of your own money as possible in the
                    business. Prepare your plan and look for funding for your business from
                    multiple sources, which can include a business loan or business line of
                    credit.

                     


                    Don't go it alone. Plan ahead now to build your team. Your team may
                    include a CPA and an attorney that you work with as needed. Add a
                    mentor from your industry and get a SCORE mentor to help you plan for
                    success. No one has all the answers. You get more ideas and information
                    by building a success, support team that can help you plan ahead.

                    3. Set up Systems.
                    The most basic system every business should have is a good financial
                    system. Ask yourself how am I going to generate enough income to
                    support myself and my family. Begin here. Put together a personal
                    budget, so you know what it costs you to live. Now, you can move on to
                    the business budget and sales planning, so you can see how many sales
                    you need to break even and make a profit. The start-up expense plan,
                    operating budget and your accounting software are vital to your
                    success.

                     

                     

                    4. Seek out Sales.
                    The daunting question is how do you go about seeking out your first
                    sale. Recognize that since you don't have a big ad budget to be seen by
                    everyone, you need to target a niche and get connected in your market
                    community, be it local, regional or national. You need other people
                    selling for you-not employees-goodwill referrals. Get out and talk to
                    as many people as you can. Join organizations that would have clients
                    for your product or service. Become a visible part of your market, and
                    then ask for the sale. You begin the sales process with people that you
                    know. Yes, it's okay to start with friends and family as your first
                    customers, and then broaden from there.

                     

                     

                    5. Aim for Growth.
                    The basic tenant of creating a company is that you own the company. You
                    are not just creating a job for yourself. It's less risk and less
                    investment to get a job. Building a business is creating a company that
                    is more than the job itself. Think about the future. How large do you
                    want the company to be in terms of sales, net profit and employees?
                    Your answer to each of these questions will influence how you grow.
                    There are varying costs and profits associated with growth. It's
                    important to make a deliberate choice early about how you want to grow
                    your company.

                     


                    6. Leverage Opportunities.
                    Good luck. Good fortune. Good timing. All play a part in business. As a
                    business owner, be very clear about your core focus for the business
                    and how it serves clients. Your core business is what pays the bills.
                    Then, as an entrepreneur you are about opportunity. When you see a
                    potential opportunity or stroke of luck measure it against your core
                    business focus. Good fortune is great, when it matches your vision for
                    the business. Always consider if a good opportunity is the right fit
                    for your business. If something looks great, but it's not in sync with
                    your long-term plan and budget, think carefully before committing your
                    company's resources.