Expert: Arthur Naman - 2/26/2011

Question
QUESTION: I have a business partner. Each of our cars are paid for out of our business account. My car payments are higher than his. Would i not owe him the difference since we are splitting up? Conversely, our company pays Health Insurance for both of us. His payments are higher than mine. Would he then not owe me the difference as well? Any advice would be appreciated. Thanks.

ANSWER: There is no "right or wrong" answer to your question; if depends on what the two of you agree to. In addition, the answer depends on the legal form under which you are operating -- partnership, corporation, etc.

You might consider asking for help from whoever is preparing your income tax returns to ensure that your annual tax return for both the business and your personal return is prepared as you wish.

Please ask a follow-up if you have additional questions.



---------- FOLLOW-UP ----------

QUESTION: We are an LLC. We did not have a partnership agreement in writing. If I'm not mistaken, absent an agreement, all things should remain equal, i.e. 50-50. All benefits paid out should remain equal as well, as would sick days, vacation time etc. Does the additional info help?

Answer
This is really a legal question rather than a tax or accounting question. The division of distributions can be whatever the partners decide.

I expect that the assumption is a 50/50 split, but I would not rely on that.

Talk to an attorney.  Get your agreement in writing.