Hello I am considering an offer from a family friend to invest in their small business for a guaranteed return that is very attractive compared to the anemic rates banks offer these days. Assumptions (so we keep advice tuned to what I'm looking for, rather than get side-tracked) - Location: USA - We're not talking about a million bucks here, nowhere near that - I have a full-time job, and not gambling away all my savings - I understand the risk involved and have decided to go ahead with the investment (hey, it's my money, right ) My question is how do I go about doing this for tax purposes? I have never owned a business, so I have no clue on where to start. I am not in any partnership or association with this friend. He would presumably send me checks every few months which I'm thinking of pushing into a regular savings account of some sort. But no idea beyond that. Would I have to set up some kind of company or corporation? Any advice is much appreciated.