Pay team mates out of revenues on my name
"Can I deduct the money that I giving to my team mates from the taxes   that I pay? If yes, how should I record the transaction? Why? Why are you giving money to your team mates? That's the most important question, and any answer without taking this into account is not full. You would probably have to talk to a professional tax adviser (a CPA/EA licensed in your state) about the details, but in general - you cannot deduct money you give someone just because you feel like it. Moreover, it may be subject to an additional tax - the gift tax. PS: We don't have any partnership or something similar, it is just   each of us on his own. Assuming you want to give your team mates money because you developed the project together - then you do in fact have a partnership. In order to split the income properly, you should get a tax ID for the partnership, and issue a 1065 and K-1 for each team mate. In most states, you don't need to ""register"" a partnership with the state. Mere ""lets do things together"" creates a partnership. Otherwise, if they work for you (as opposed to with you in the case above), you can treat it as your own business income, and pay your team mates (who are now your contractors/employees) accordingly. Be careful here, because the difference between contractor and employee in tax law is significant, and you may end up being on the hook for a lot of things you're not aware of. Bottom line, in certain situation you cannot deduct, in others you can - you have to discuss it with a professional. Doing these things on your own without fully understanding what each term means - is dangerous, and IRS doesn't forgive for ""honest mistakes""." Note:  This is not professional tax advice.  If you think you need professional tax advice, find a licensed professional in your local area. What are the expected earnings/year? US$100? US$1,000?  US$100,000?  I would say if this is for US$1,000 or less that registering an EIN, and consulting a CPA to file a Partnership Tax return is not going to be a profitable exercise.... all the earnings, perhaps more, will go to paying someone to do (or help do) the tax filings. The simplest taxes are for a business that you completely own.  Corporations and Partnerships involve additional forms and get more and more and complex, and even more so when it involves foreign participation.  Partnerships are often not formal partnerships but can be more easily thought of as independent businesses that each participants owns, that are simply doing some business with each other. Schedule C is the IRS form you fill out for any businesses that you own. On schedule C you would list the income from advertising.  Also on schedule C there is a place for all of the business expenses, such as ads that you buy, a server that you rent, supplies, employees, and independent contractors.  Amounts paid to an independent contractor certainly need not be based on hours, but could be a fixed fee, or based on profit earned.   Finally, if you pay anyone in the USA over a certain amount, you have to tell the IRS about that with a Form 1099 at the beginning of the next year, so they can fill out their taxes.  BUT.... according to an article in International Tax Blog you might not have to file Form 1099 with the IRS for foreign contractors if they are not US persons (not a US citizen or a resident visa holder).
Not sure if you mean that your SO stands to inherit $18 million or has inherited it already.  I would hope that her family already has a team of financial advisors at that point.   The name of the game at that asset level is protection.  You have enough money so you want to keep up with inflation and generate some income.  Most of my firm's clients at that size have at least 50% in tax-free municipal bonds the other half is about 10% in aggressive investments (private equity, aggressive stock managers), and 25% in conservative stock investments, 5% in international investments, and 10% in alternative investments (long/short, GTAA, hedged equity) .  They also tend to have quite a bit of income producing real estate.   Make sure you meet with a financial advisory firm the specializes in high net worth clients.  I work for an independent RIA so I may be biased towards independent and fee-only firms but it seems like the best arrangement.  You pay a percentage of assets under management and get objective investment advice with no commissions.  For $18 mil anything over .50% as an advisory fee is a ripoff.  You all in investment cost should be less than 0.90%.   Also you should look into a high net worth insurance broker.  You current insurance salesman will be in way over his head.    Feel free to PM me with specific questions.  Also, if you want to hire my firm that would be great haha! "There are countries out there that are known as tax havens, where they offer companies low or no taxes on earned revenue. I haven't looked into this in over a decade, but recall that countries like the Cayman Islands, Switzerland, Ireland, and Nauru, to name a few fit that tag. But like bstpierre stated, there's a reason why the IBM's of the world can pull that off easier then us mere mortals. They have the financial clout to make sure they have accountants that dot every i, cross every t, and close every loophole that would give an ""in"" to the folks at the IRS, CRA, Inland Revenue, or who have you." You probably cant live in Manhattan on 1800 per month with such little savings. Try for Brooklyn or Queens with several room mates. Jersey City is likely out of your price range as well.  It would be wise to leverage technology to help keep your budget and savings projections under control during this time and moving forward. Whether you use a spreadsheet or a tool like OnTrajectory.com or some other website -- you have to get everything out in front of you so you can make smarter decisions. Once you do that, then you will be able to get the most out of your savings and income. Good luck! I tried this, wanted to talk to a product team about a customer problem. I was ignored. Called it out on my monthly report that quickly went up the chain of command and cascaded back down to them, they act surprised saying they never heard about it, no shit Sherlock, your team ignored me. "There is no one solution to every project finance problem. Two models might make sense in this situation, however. In this case, you would count all the money that you give to your friend as a loan which he will pay back with interest. The interest rate and loan amounts will have to be agreed on by both of you. One one hand, the interest should be high enough to reward you in a successful outcome for the amount of risk that you take on if things don't work out. On the other, the interest rate needs to be low enough where his earnings after loan repayment justify your friend's effort, in addition to being competitive to ant rate your friend could secure from a bank. The downside to this plan is you don't directly benefit from the franchise's profits. In this model, you will record the cash that each of you invests. Since your friend is also adding ""sweat equity"" by setting up and operating the franchise, you will need to quantify the work that your friend and you invest into the franchise. Then you can determine how much each of you has invested in terms of dollars and split any franchise profits based on those proportions. The downside of this plan is that it is difficult to estimate how much time each of you invests and how much that time is worth." "The issues are larger than taxes.  If one of you receives the check, then breaks off 25% of it for themselves and sends three checks out to each of you that will be indicated on that person's taxes.  You three will then all recognize your portion of the income on your taxes and it's all settled.  It's no big deal, it's a bit rag-tag but it'll get the job done.  I've done little ad-hoc partnership work with people this way and it's not a problem. This is why you should really be more formal.  What if this entity contracting you guys sues you?  Who has the liability, if only one of you was paid?  What if the money is sent to one of you and that person dies before paying you?  What if you all get another client?  What if this contracting entity has another project?   The partnership needs to have the liability.  The partnership needs to receive the money.  The partnership needs to be named on whatever contract you all sign.  The partnership can be a straight partnership, or maybe the four of you take a 25% stake in an LLC or Inc arrangement.  Minimally, you should sit down with your partners so everyone knows everyone else's responsibilities, and you should write it all down.  It probably sounds like overkill, and I'm sure your partners are you buddies and ""we're tight and nothing bad could come between us.""  I've done some partnership work with more than one friend, we've always been fine.  Some ventures are successful, some aren't; I'm still very good friends with all of them.  Writing things down manages expectations and when money starts moving around, everyone is happier when everyone has a solid expectation of who gets what." From my understanding, only A and B are shareholders, and M is a managing entity that takes commission on the profit. Assuming that's true.  At the start of the project, A contributes $500,000. At this point, A is the sole shareholder, owning 100% of the project that's valued at $500,000.  The real question is, did the value of the project change when B contributed 3 month later. If the value didn't change, then A owns 33.33%, and B owns 66.66%. Assuming both A and B wants to pay themselves with the $800,000 profit, then A gets a third of that, and B gets the rest.  However, if at the time of B's contribution, both parties agreed that the pre-money of the project has changed to $1 million, then B owns half the project valued at 2 million post-money. Then the profit would be split half way. "Equity does not represent production divisions in a company (i.e. chocolate, strawberry, and vanilla does not make sense).  In Sole proprietorship, equity represents 1 owner.  In Partnership, equity has at least two sub-accounts, namely Partner 1 and Partner 2.  In Corporations, equity may have Common Stockholders and Preferred Stockholders, or even different class of shares for insiders and angel investors.  As you can see, equity represents who owns the company. It is not what the company does or manufactures.  First and foremost, define the boundary of the firm. Are your books titled ""The books of the family of Doe"", ""The books of Mr & Mrs Doe"", or ""The books of Mr & Mrs Doe & Sons"".  Ask yourself, who ""owns"" this family. If you believe that a marriage is perpetual until further notice then it does not make any sense to constantly calculate which parent owns the family more. In partnership, firm profits are attributed to partner's accounts using previously agreed ratio. For example, (60%/40% because Partner 1 is more hard working and valuable to the firm.  Does your child own this family? Does he/she have any rights to use the assets, to earn income from the assets, to transfer the assets to others, or to enforce private property rights? If they don't have a part of these rights, they are certainly NOT part of Equity.  So what happens to the expenses of children if you follow the ""partnership"" model? There are two ways. The first way is to attribute the Loss to the parents/family since you do not expect the children to repay. It is an unrecoverable loss written off. The second way is to create a Debtor(Asset) account to aggregate all child expense, then create a separate book called ""The books Children 1"", and classify the expense in that separate book.  I advise using ""The family of Doe"" as the firm's boundary, and having 1 Equity account to simplify everything. It is ultimately up to you to decide the boundaries."