Accounting For Business Partners

Working with a business partner can give you a competitive advantage as long as you can pool experience, share resources and clearly communicate objectives. The question is how do handle the accounting. Below are a few tips.

First, make sure you and your partner can work together and communicate business goals. Read The Partnership Charter by David Gage.

Second,you and your partner(s) must decide on business objectives, division of responsbilities, and how sales from business development effort is distributed. Is it an even split? Make it clear and document in a contract.

Third, your corporate structure can dictate how the profits and or income of the company is distributed. For S-Corp or C-Corp, partners are usually paid a salary. For an LLC, I know some business partners elect to take a regularly (bi-weekly or monthly) draw from the income of the business. Of course, this would have to be a proper so as to not be able to cover monthly overhead expenses. There should an accounting of eah partner's investment in the company, so that it is known how much money is invested or how many has to be paid back if there was a loan.

Fourth, have one corporate credit card account, but have separate credit cards for each partners. Business should not slow down to halt because one partner has the only credit card and the other needs to purchase something for the office.