Over the last few weeks, I have explained how to calculate income for various self employed entities for the purpose of getting a mortgage. Last week, I covered S-Corps and C-Corps and the week before I covered LLC and Sole Proprietorship income. Today, I would like to finish off the self employed income types with partnerships. Partnerships can be the most complicated business entity, simply because there are so many different partnership arrangements possible between limited partnerships, general partnerships, limited liability partnerships, and so on.

Fortunately, calculating income for all of these partnerships is very similar. Ultimately, what you need to do is calculate how much income the partnership earned, subtract the expenses of the partnership, and then divide out your ownership stake in the business. For about 95% of partnerships, this will suffice. A full review of your partnership paperwork is important, however, to determine if there is anything else pertinent to the ownership and the income which comes from the partnership.

If you do have a complicated partnership agreement and think you might be in that 5% who cannot determine their income this way, it is important to have a mortgage professional review your paperwork. I recently had a client who was looking to purchase a property in Brighton whose income was largely derived from a partnership. He thought he earned a certain income from the business, but after reviewing the documentation we realized he was actually due a larger portion of the partnership earnings. There was some convoluted verbiage in the partnership agreement which ultimately favored him. This change allowed him to increase his budget and get the house of his dreams.

If you have any questions about calculating income from a partnership, please contact me. And if you have anything to add, please leave a comment.