Q: If I am helping a friend lease a business space for HIS business, do I need to report anything to the IRS on my end?
My friend is starting up a business, he’s doing good and now needs a shop to work. He does not have the credit to lease a place. He asked me to help him lease in exchange for 10% of earnings. What would I have to report to the IRS or does his total earnings affect me in any way? I am aware I’m putting my credit score on the line, but how’s else can helping him lease affect me?
A: I'm not a tax attorney, and you may need to consult one or a CPA for details, but my understanding is that the IRS only cares about your income received, so you need to report to them your income from that source.
Although not mandatory, I hope you have this agreement in writing. The 10% payment in exchange for co-signing a lease is considered in the broad definition of gross income. So, the short answer is yes, it must be reported to the IRS. Your friend may also have an obligation to issue you a 1099, so advise him to contact a CPA or tax lawyer.
There is always a risk in co-signing and it appears that you are already aware of it. Not only are you putting your credit score on the line in the event of default (not paying the rent), but you are also responsible of any unpaid obligation if your friend is unable to pay. Although 10% can be lucrative, weigh your options well.
A: Short answer ... depends upon whether you are "on the Lease" or a "guarantor of the lease payments" ... in addition to a variety of other issues ... such as a "defacto partnership" ... and issues with the usuary laws ... so, the next step for you is to schedule a free initial consultation, by video call, with at least two attorneys of your choices ... feel free to let us know how we can be of assistance to you ... thank you.
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