I just had lunch with Gary Schwartz. Gary is a top-notch attorney at Couzens, Lansky, Fealk, Ellis, Roeder, & Lazar, P.C. The following is NOT the advice of Gary Schwartz or his firm. It is strictly my interpretation of partnership law. As I am not an attorney, seek guidance from a skilled attorney, such as Gary Schwartz or someone else. Contact me for referrals. mike at kwiketaxe.com.

There are a lot of questions to be answered BEFORE one enters a partnership, especially one that is not a “cookie-cutter” type. A “cookie-cutter” would be 2 partners, each entering the partnership with half the cash for 50% of the profits, losses, and any capital distributions. Anything more complicated than that requires clear forethought and a lot of “what-iffing.”

There can be different results for taxes and books. Sounds boring until it’s you on the receiving end of a huge tax bill with no matching income to pay it!

One more thing about screwing up a partnership (that’s a technical legal term I borrowed from someone…not Gary Scwartz), there is not always an “undo” button to reverse the calamitous effects of the error(s). (Usually, there is more than one error!)

Lesson to be learned: unless you’re cutting cookies with your partnership, see a professional…or two!