QUESTION:
In short: How are 'venturers' taxed in a Joint Venture?
Details: I have been asked to par take in JOnt Venture, a short project,
that two to three business' will take part in until the project is complete,
then we will all go our seperate ways(back our regular business).
I am not bringing any money into the business, as the others have more
capital to invest, I will however be given truck, a computer, and some
tools - in exchange for my 'brains'. Do I run the risk of being considered
by CRA, an employee, instead of a 'venturer'? I get to keep all this assets
by the way.
And once the business makes money, and we assume it will, do I run the
profits through my existing business where I am a proprietor, or what
happens? I guess this is where I come back to my question.
Please help - I am very confused and what to do some tax planning for
myself.
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david ingram replies:
There may be three joint venturers and each may end up being taxed
differently depending upon how they have "entered" the joint venture.
As described, there would likely be a T2124 filed for the partnership and
you would put your 1/3 on line 135 of your personal tax return.
Any more, and you are going to have to sit down and pay someone for a
consultation to decide how you are going to be part of the joint venture.
If there are large amounts of money involved, you might want to enter the
joint venture as a corporation. Even though I advise 99 out of a 100 people
NOT to incorporate, if you are going into business with deep pocket
partners, it is really easy for them to leave you holding the bag if
something goes wrong.
i.e. if one of the other joint venturers is operating as a corporation and
causes a large bill to be run up, all members of the joint venture are
liable for the bill. If you had two zero asset joint venture corporate
partners, "your" house is on the line because of "their" actions.
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