How to handle business expenses?

[mikehende]

Hello, a partner and I went into business a few months ago, he's the official owner and puts out all finance, my job is to source, sell and manage all sales and inventory, we split profits half and half. I wish to be fair to him so I am thinking since we split profits down the middle why should he pay for all business expenses himself? Therefore what I am thinking is to split all business expenses with him. Now my question to you pros here would be, how is best for us to pay for these expenses?

His accountant says we can write off all business expenses at tax time but I don't understand how I should help him pay for these expenses during the year?

 

[AccountantSalary]

Rather than splitting one expense down the middle, how about you take all of some expenses and he takes all of other expenses, so that you're each taking about half. For example, maybe you pay for all paper and postage, and he takes care of all electricity and printer supplies?

 

[mikehende]

Not so sure at this point if that will be fair to him and myself since some expenses cost more than others?

 

[bklynboy]

Are you sure he is paying all expenses as opposed to paying it out of the corporate fund as he is the owner? My guess is he is not paying these out of his personal assets but deducting from the profits before you split the earnings. This would be the logical thing to do and I would be hard pressed to see why he would not do this. For instance if he pays $1000 in a month for expenses, this is deducted from the gross profit (say 5000) on your sales/services before he divides the profits (4000 of which each gets 2000). In effect, the business pays for the expense and he is not out any money. If he fronts the 1000 out of his personal assets, then it should be considered a loan to the business which is repaid before any profits are distributed (in my example, he gets 1000 returned as the loan repay and gets another 2000 for profit). Either way I dont see why you need to pay anything.

 

[mikehende]

Are you sure he is paying all expenses as opposed to paying it out of the corporate fund as he is the owner?

Since he is the official owner and financier and puts out all business expenses "from his own pocket" and we share profits 50/50 this is why I feel the need to split the profits remaining after we have paid all expenses,