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My friend and I (we’re high schoolers) want to create a tutoring business for elementary/middle schoolers. I figured it would be structure as a partnership but I have been hearing about LLPs. Will it be useful to be a LLP. We wont be having any losses so I don’t see the need for having limited liability. Also, I was wondering if we had to apply to be a business or get and EIN. We are going to split the earnings in half and expect to get $3,000 a year from tutoring/summer camps. Another question is, if we were to employ other people to tutor (they will earn less money than us) would we have to pay extra taxes. I am also a bit confused about filing taxes as we are earning more than 1000 dollars. It would be great if you could help if you know anything or have any experience with this kind of stuff

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  • Added a country tag. Commented Jan 9, 2023 at 13:41
  • The accounting details might be off topic in this stack, I'm afraid. For the details of an LLP, the Law stack is likely to give you better answers.
    – keshlam
    Commented Jan 9, 2023 at 16:33

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I would talk with a local CPA in your area, or maybe a business professor at a local college, but here are some general suggestions:

  • An LLP seems too complicated for what you're describing. An LLP protects partners from the actions or negligence of other partners. It's more commonly used by professional firms like lawyers and accountants, where one partner could get sued for their own actions. It seems unlikely that a tutoring business would get sued for negligence. You can just write out a simple partnership agreement without having to go through the hassle and cost of setting up an LLP.
  • If you employ other people, then the money you pay them would be an expense that would be deducted from your net income (and would be taxable income for them). Of course, the expectation is that those people would create more revenue that they cost (otherwise why would you hire them?) so there would be a net increase in tax simply due to the additional net revenue.
  • Most partnerships are pass-through entities, where each partner declares their portion of the expenses and revenue of the company, paying personal income tax on their share of the profits.

Bottom line: you'll simply split the net profits equally (and be fully liability for debt) and pay personal income tax on that income. The paperwork of creating a partnership does not affect the taxes, but defines the responsibilities and authority of each partner, among other things. It should be used to protect the partners from one another.

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  • Thank you for this answer. I was wondering how I would file personal income tax as a minor. I read that as long as you earn under $12,950 as a minor, you would not have to pay taxes. Could you please tell me if I am wrong and explain what exactly I should do? Commented Jan 9, 2023 at 18:58
  • That's true for "regular" income, but since you are self employed you may still need to pay self employment tax, and may have state requirements as well.
    – D Stanley
    Commented Jan 9, 2023 at 19:30

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