@Anonymous wrote:
Ah thank you for the clarification! The 1099-K should also be issued in the name and EIN of the partnership, right?
The IRS does not have special rules for LLCs since they are creations of state law. You might or might not want to make an LLC for other reasons, the IRS doesn't care.
Unless you elect to be taxed as an S-corporation**, you are a partnership. The partnership needs an EIN (this will be linked to the SSN of the person who applies for it as the responsible person, but it will belong to the partnership) and all partnership business should be carried out with the EIN.
**This is a complex decision and requires substantial legal and financial advice before taking that step.
When the partnership files it's form 1065 tax return, it will generate a K-1 statement for each partner that the partner will include as part of their regular personal tax return. The K-1 passes income and expenses to the partners. The amount of cash you "draw" is not necessarily your income. If the partnership nets $5000 profit after expenses, each partner may be taxed on $2500, even if you draw differently. For this and other reasons, you should have some kind of partnership agreement in writing—what is the ownership percentage, the responsibilities of the partners, and so on. You may want professional help to set up the partnership finances in the first year, even if you carry on with your own taxes and accounting from there.
