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During the course of this forum, I've been approached more than once with proposals to sell goods for someone else. "You sell for me and we'll split the profit." People whom I have not met, who are an internet distance away, but who seem like reliable and trustworthy people. Sounds like a good idea in principle - after all, I have EBay accounts that have no limits on them, and can sell virtually anything on them without fear of limitation.
(BUT keep in mind, that with someone who does NOT have solid, old time Modee created accounts - the possibility of limitation IS there when selling large quantities of goods, especially when selling types of goods that have not been before sold on that particular Ebay account.)
But, when it comes to selling something for someone else, a lot of issues come up. One issue is that if I were to sell over 200 items and $20K worth of goods in a year
Reporting requirements - U.S. merchant accounts beginning January 1, 2012 - IRS taxes - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
Taxes - PayPal, other credit card processors reporting income (gross receipts) to IRS - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
(which I do anyway), I would incur a tax liability for the goods I sold for someone else. And then, if I owe taxes on the goods, how do we figure out what the net profit is for purposes of the split? What if, one year, I have a loss carry forward from a prior year to offset income, but the next I do not. Does that mean that the one year I should be allowed to deduct taxes from my portion of the proceeds, and the next year not? And, WHEN do I deduct these taxes? After I have paid the taxes? in which case, my partner who wants me to sell goods for him cannot even know what my end of the profit is until my taxes are done. In short, tax liability creates an issue that is not easily remedied in a simple "We sell the goods for one dollar, they cost me twenty cents, and we split the eighty cents between us" type arrangement.
Sometimes, the messiness of a partnership with someone who is, let's face it, not exactly next door, for something that would undoubtedly create tax liability, is not always worth the potential profit. Short of creating some sort of limited partnership and paying expenses off the top and then issuing something like a K-1 (an IRS form that reports (BASICALLY) each partner's income and losses), I am not sure how this could be managed. In short, to do it right would require some formal partnership agreement which would address the tax liability.
Unless, I suppose one way to do it would be if the one with the goods agreed to provide his goods at a certain price to the seller, and then all the profit and taxes would be the seller's problem. That would be simple and might work. But the issue that would then come up undoubtedly, would be what if the goods didn't sell? And then in return whether the solution to that, giving the seller the goods on consignment, would even be feasible given that the goods provider and me the seller are, as I mentioned, not exactly next door.
I have been involved with many different partnerships and business entities, including limited partnerships, general partnerships, corporations, LLCs and also just simple straight non-registered partnerships with formally written contracts, or even deals done just on a hand shake. I've done it all when it comes to business, and I know about all the possibilities when it comes to what could go wrong, or what should go right.
Bottom line is then that although such proposals - you sell my Ebay goods for me and we split the profit - seem so simple, they really are not. Such arrangements can worked out of course - if the net reward is adequate for both parties.
(BUT keep in mind, that with someone who does NOT have solid, old time Modee created accounts - the possibility of limitation IS there when selling large quantities of goods, especially when selling types of goods that have not been before sold on that particular Ebay account.)
But, when it comes to selling something for someone else, a lot of issues come up. One issue is that if I were to sell over 200 items and $20K worth of goods in a year
Reporting requirements - U.S. merchant accounts beginning January 1, 2012 - IRS taxes - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
Taxes - PayPal, other credit card processors reporting income (gross receipts) to IRS - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
(which I do anyway), I would incur a tax liability for the goods I sold for someone else. And then, if I owe taxes on the goods, how do we figure out what the net profit is for purposes of the split? What if, one year, I have a loss carry forward from a prior year to offset income, but the next I do not. Does that mean that the one year I should be allowed to deduct taxes from my portion of the proceeds, and the next year not? And, WHEN do I deduct these taxes? After I have paid the taxes? in which case, my partner who wants me to sell goods for him cannot even know what my end of the profit is until my taxes are done. In short, tax liability creates an issue that is not easily remedied in a simple "We sell the goods for one dollar, they cost me twenty cents, and we split the eighty cents between us" type arrangement.
Sometimes, the messiness of a partnership with someone who is, let's face it, not exactly next door, for something that would undoubtedly create tax liability, is not always worth the potential profit. Short of creating some sort of limited partnership and paying expenses off the top and then issuing something like a K-1 (an IRS form that reports (BASICALLY) each partner's income and losses), I am not sure how this could be managed. In short, to do it right would require some formal partnership agreement which would address the tax liability.
Unless, I suppose one way to do it would be if the one with the goods agreed to provide his goods at a certain price to the seller, and then all the profit and taxes would be the seller's problem. That would be simple and might work. But the issue that would then come up undoubtedly, would be what if the goods didn't sell? And then in return whether the solution to that, giving the seller the goods on consignment, would even be feasible given that the goods provider and me the seller are, as I mentioned, not exactly next door.
I have been involved with many different partnerships and business entities, including limited partnerships, general partnerships, corporations, LLCs and also just simple straight non-registered partnerships with formally written contracts, or even deals done just on a hand shake. I've done it all when it comes to business, and I know about all the possibilities when it comes to what could go wrong, or what should go right.
Bottom line is then that although such proposals - you sell my Ebay goods for me and we split the profit - seem so simple, they really are not. Such arrangements can worked out of course - if the net reward is adequate for both parties.
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