What are the tax implications of a joint venture?

In West Virginia, joint ventures can present a unique set of tax implications depending on the legal structure of the venture. In general, joint ventures are viewed by the Internal Revenue Service as either a partnership, corporation, or disregarded entity. Partnership status means that the venture itself is not liable for income taxes; instead, the profits, losses, deductions, and credits resulting from the venture are reported on the personal income tax returns of each participant. The venture may be required to file a state Tax Information Return (TIR), however. Corporations, on the other hand, are subject to federal, state, and in some cases, local income taxes and must file a corporate income tax return. Disregarded entities are not required to file any tax returns or pay any taxes. In addition to the previously mentioned taxes, joint ventures may be subject to employment taxes if the venture involves wages or salaries. Employment taxes include Social Security taxes, Medicare taxes, and additional wage and salary withholding where applicable. Additionally, any property held by the joint venture may be subject to capital gains taxes when it is sold. Finally, joint venturers should keep in mind that, depending on their respective financial contributions, the general partners of a joint venture may be liable for “self-employment taxes,” which are taxes that self-employed individuals must pay to fund Social Security, Medicare, and in some cases, disability and unemployment insurance.

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What are the tax implications of a joint venture?

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