The formation of a business entity in California can take one of several forms:
A sole proprietorship involves one owner who owns, manages, and controls the business. The profits and losses from a sole proprietorship are reported on the owner’s Form 1040 tax return, Schedule C.
Co-ownership occurs where two or more persons enter either an oral or written agreement to jointly own property, which is commonly known as tenant-in-common agreements or simply “TIC agreements.” Profits and losses are generally allocated in proportion to the percentage of ownership of each co-owner and reported on each owner’s Form 1040 tax return. Co-ownership may be best suited for a situation in which a small group of people jointly owns an income-producing asset, such as residential rental property, commercial rental property, or other investment that does not require a substantial amount of active management. (more…)