Husband and wife LLC, is it better to file as a partnership tax return or 2 schedule Cs?
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Here is a good discussion about this issue:
Last edited by ttbtaxes; 10-28-2022, 10:11 AM. -
That article only addresses what is allowed (basically, MMLLCs cannot file as Qualified Joint Ventures (QJV) unless spousal co-owners are in community property states).
The question was, which is better?
Obviously it is a subjective evaluation. Downside of filing partnership return: extra cost, additional exposure to failure to file penalties. But I think it is outweighed by the upside: a partnership return does a better job of capturing the full scope of the business, primarily because it includes a balance sheet (yes, I know not required below certain income thresholds, but I always advise including a balance sheet when filing an entity return). Two schedule Cs do not clearly show a unified view of the business, nor each partner's contributions/withdrawals, nor do they clearly show how the business might change ownership over time, and eventually dissolve.
"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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When you sell, you might not want your potential buyer looking at your 1040 instead of a 1065. Same with taking on a new investor. The QJV only works for H/w in community property states.Comment
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In any peer to peer business transactions you can just show your Sch C. I have done that and did not want to see the full 1040 of the seller. I actually got more information required to make a prudent buy decision by viewing their billing records.Originally posted by Lion View PostTaxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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Here is an article from the Tax Advisor which address the topic of choosing an entity for husband wife.
https://www.thetaxadviser.com/newsle...-business.html.Comment
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