Good evening good people!
Question and backstory and thank you for any feedback.
Question; My business partner went rogue, spent the money and ran the business into the ground, then left. How do I make him responsible for the income that he squandered, vs. myself that shouldn't be paying income tax for his income, I hope!
I (Partner A, Contractor and Sole-Proprietor) had a business partner (Partner B) for most of last year, 2019. The arrangement had not yet become an LLC or Corporation, and was and is a sole-proprietorship. Although the arrangement was documented as; 2 persons with equal opportunity in sharing profits (and losses) an informal agreement while incorporating. April 2019 to November 2019.
The (Partner B) withdrew funds at such a high rate that the company failed. Additionally, the (Partner B) was filling others' gas tanks frequently and against policy and after he had been asked not to do so. The company was sub-contracted by three contractors to perform services for them. All of these relationships ended as the funds to complete projects were not available. The company was asked to leave the projects and not return, causing the contractor to hire others to complete the contracted services. In one case, the company became liable for the completion of the project and had to pay for the costs of completing the project.
Also, because of the excessive withdrawals from the bank, employees were not able to be paid. The company was required to take a 25,000 loan from a lender to pay the employees and recover from the damages caused by the reckless financial behavior of the partner.
I would also like to mention that my income was minimal throughout the time period, several months, in order to boost the company in it's early stages. The ratio of income between myself, Partner-A and Partner-B, was 1:4
All documented.
Considering Partner-B has no assets, so a lawsuit seems counter-productive and a waste of resources (that are not available)...
My Question; Is there a way to direct the income to Partner-B, so that I am myself not liable to pay income tax on the income that Partner-B had absorbed? (Because it is now 2020 and this happened last year. Through my payroll company, is there a form or... anything I can present to him and the IRS to make it his income?
