Can A Partner In A Business In Florida Also Be Considered An Employee Of The Company?
Business partners rely on each other to work towards building a strong and successful company. A partnership in Florida may also rely on the contributions of others, including the employees that they hire. You may be wondering: Can a partner in a business partnership also be an employee in Florida? The technical answer is “no”—at least in the eyes of the IRS. Though, the more practical answer is “it depends.” Within this article, our West Palm Beach partnership dispute lawyer discusses the important details to understand about the intersection between the partnership business structure and employment law in Florida.
IRS Regulations: Members of a Partnership are Self-Employed
As a starting point, it is important to take a look at the tax regulations. The Internal Revenue Service (IRS) is clear on this issue: A business partner is not an employee. For the purposes of federal tax law, there is no ambiguity on this matter. The IRS explains that “partners are not employees and shouldn’t be issued a Form W-2.” Instead, the members of a business partnership are self-employed. The partnership is taxed as a pass-through entity.
A Business Partner Benefits and Responsibilities Can Be Functionally Similar to an Employee
Although business partners are not employees in the eyes of the IRS, that is primarily a tax and financial matter. It has less meaning for the day-to-day operations of the company. A partnership agreement could structure the business in a manner in which one (or more) of the partners has duties that are similar to that of an employee.
Further, a business partnership in Florida could also potentially structure financial distributions in a way that makes it so that one (or more) of the partners receive distributions on a pre-set schedule that is similar to a traditional paychecks. Though, when this occurs, no W-2 form should ever be issued to the business partner. Any distribution is considered to be self-employment income, even when it comes at regular, pre-scheduled intervals.
Well-Defined Roles Help to Reduce Partnership Disputes
A dispute between business partners could cause serious damage to the underlying business. There is a heightened risk of partnership disputes when partners are heavily involved in the day-to-day operations of the business—especially when one partner has more (or less) responsibilities than others. Well-defined and well-understood roles as well as a properly-drafted partnership agreement can significantly reduce the risk of a partnership dispute.
Contact Our Palm Beach County Partnership Law Attorney Today
At Pike & Lustig, LLP, we are adept in handling complex partnership law matters. If you have any specific questions about partnerships and employment law, our commercial lawyer is here as a resource. Contact us now to schedule an appointment. From our West Palm Beach law office, we handle partnership law cases and disputes throughout all of Palm Beach County. We also have additional law office locations in Miami and Wellington to serve clients throughout South Florida.
Source:
irs.gov/businesses/partnerships#:~:text=Reporting%20Partnership%20Income&text=Each%20partner%20reports%20their%20share,Form%201065)%20to%20the%20partner
