LLC entity

[John C]

Does anyone know if a husband and wife can be considered a single-member entity for a LLC?

[Koss]

His Better Half

I don't see how that could be done...

There is a new rule that allows a husband and wife business to simply file two separate Schedules C instead of being deemed a partnership and forced to file a 1065 with all the associated baggage.

But if you do it that way, you have two sole proprietors, not an LLC.

An LLC is not an entity recognized by federal tax law. It is established under state law. Under federal tax law, the LLC members can elect any structure they want: partnership, S corp, C corp, or, in the case of a single-member LLC, it can elect to be a sole prop.

But if an LLC has two members, it's not a single-member LLC. So they would have to elect one of the other structures for tax purposes. If they don't make an election, it will default to a partnership. And that type of partnership can't file two Schedules C.

Now, I suppose it could be a single-member LLC if one of the spouses was deceased...

Burton M. Koss
koss@usakoss.net

[Bees Knees]

But if an LLC has two members, it's not a single-member LLC. So they would have to elect one of the other structures for tax purposes. If they don't make an election, it will default to a partnership. And that type of partnership can't file two Schedules C.

I disagree.

I agree a H&W partnership is not a single member LLC.

However, I disagree with the idea that a H&W LLC cannot file as a qualified joint venture. An LLC is a state law, not federal. If a H&W own and operate a business, they are already a partnership under federal law. Under federal law, a H&W partnership can elect to be treated as a qualified joint venture and file two separate Schedule Cs. Applying for LLC status under state law does not change anything. It merely provides liability protection for the H&W partnership. They are still a two member LLC, that has elected to not be treated as a partnership for federal tax purposes.

[winnie]

huge issue this year

I think this husband/wife LLC issue is a big question this year. I was interpreting the new rule to mean that they could file the separate Schedule "C"s under the idea that it is a joint business venture.

One more item for disucssion: what if husband/wife LLC has rental property? Need a partnership return?

Curious to see what others are thinking.

[John of PA]

Yes in PA

Pennsylvania allows a joint ownership of an LLC interest to be titled as tennants by the entirety. (vs joint tennancy) I have a husband and wife who jointly are one owner and file as a SMLLC. Be sure to clear it with the attorney who set up the LLC that it's titled that way. Of course, if this is the case, when one dies, their will cannot direct where there share of the LLC goes, it is automatically 100% owned by the other person. As a side fact, in PA, ones personal residence must be titled this way by state law.