4020: The first thing to do is to talk with a LAWYER on whether you should incorporate or not. I have found in family situations that incorporating is usually a mistake in the long term. The tax guys and estate planners make it all sound good but in real life it just makes a mixed marriage that is usually doomed to fail. The problems usually come from the non blood spouses. They have no ties to the family members other than through their spouse. That tie is not much and their view point is very tainted toward themselves usually.
As far as tax wise the asset is just owned on a percentage basis. You own 20,30,or whatever percentage. So you depreciate that percentage.
The repairs are just a direct expense. I pay all of the ones on the joint owned equipment. Then we divide it into a per acre cost. Each user pays based on the acres they used the machine. They pay me before years end. I have seen separate accounts at implement dealers for partner ship owned equipment. Then the dealer bills each partner. This is usually only with two 50/50 partners.
Collateral wise each partner would own a set percentage just like the purchase cost/payment was divide. I will tell you that most banks will NOT put full valve on joint owned equipment. They know it would be hard for them to act on a minority partner on a partnership owned piece of equipment. Land they look at differently but most will still not be real favorable on partnership owned assets.
I will state again that I am not in favor of family corporations. TAX guys and LAWYERS LOVE them. They are just about always assured a good income off of one. The tax savings are SMALL on a percentage basis. Actually you have to watch out or you can get double taxes on income, the corporation pays and then you do too as personal income.
If you own certain assets in partnership the percentages of them are clearly spelled out. When in a corporation the ownership percentage is harder to figure on individual assets if the corporation breaks up.
Also you have to take human nature in to consideration. When you own an asset yourself you will take better care and pride in it. Ownership of an entity like a corporation does not have the same emotional effect/attachment.
Think about how a death or split in the corporation would effect everyone involved? It usually is nasty. The ownership is just not as clear.
Whether you incorporate or not make sure you have life insurance of a high enought amount so the surviving partners/share holders cam buy out any surviving relatives is one of the partners/share holders dies.
Do not make your business and estate complicated more than you have to for just a little in savings. Most of our estates will be small enought that they do not need all the twists and turns most tax and estate planners want to do. I would rather my estate pay a little in probate than be tied up in court for years while everyone fights about it. Incorporating and partnerships will make it more complicated.
While my brother was married to his first wife we refused to allow him to be in partners with us. We would do work for him at a very favorable rate but none of us wanted any business dealings with his first wife. That turned out to well worth his anger over it. She cleaned him out of well over seven figures for 10 years of marriage when she divorced him. IF he had been partners with us we would have been drug into the battle.
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