New law - Husband & Wife LLC members

[AZ-Tax]

As I understand, the new law permits a 2 member unincorporated LLC (1-member-husband) (2nd-member-wife) to file a Schedule C opposed to Partnership. Must a Schedule C be filed for each member (one for husband and one for wife) thus splitting the numbers for a 50/50 member ownership or can I file one Schedule C (married filing jointly) with 100% of the numbers?

Joe

[myerstaxes]

Beware of State Laws

I read the new law...It appears that the husband and wife cannot be recognized by their state LLC...
Here is the IRS rules...I just got a new client who wants to do this, so I needed to make sure that they had not filed for an LLC in the State...

A qualified joint venture is a joint venture that conducts a trade or business where (1) the only members of the joint venture are a husband and wife who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a general or limited partnership or limited liability company.)

[myerstaxes]

I forgot...

I forgot to address the one vs two schedule Cs...They need to file two schedule Cs...

Here is what IRS says...
Spouses make the election on a jointly filed Form 1040 by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the joint venture, and each spouse filing with the Form 1040 a separate Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) or Schedule F (Form 1040), Profit of Loss From Farming, and, if otherwise required, a separate Schedule SE (Form 1040), Self-Employment Tax. For example, to make the election for 2007, jointly file your 2007 Form 1040, with the required schedules

[les grans]

Should we infer from the language in IRS's explanation "each spouse’s respective interest in the joint venture" that 50/50 is not the only way that H and W can share in a qualified joint venture?

[Kram BergGold]

Joint venture

It is my belief that the joint venture can be split any way as long as it is based on reality. So it can be 75-25, 60-40 etc.

[Gretel]

Yes, I agree with splitting any way, whatever is appropriate. It should reflect the involvement or each.

[taxxcpa]

Tax software treatment

With my tax software, if you file a single Sch C and show ownership as "J" the program creates two Schedule SEs with 50% of the net profit going to each spouse.

[joanmcq]

That treatment is only available in community property states. In other states, you cannot file a joint Sch C.

[JON]

You can file

joint schedule Cs in any state.

[Gretel]

joint schedule Cs in any state.

...now because the law was changed to make this possible for all states.

[Bees Knees]

joint schedule Cs in any state.

Not true.

2007 Schedule C instructions:

Husband-wife business. If you and your
spouse jointly own and operate a business
and share in the profits and losses, you are
partners in a partnership, whether or not
you have a formal partnership agreement.
Do not use Schedule C or C-EZ. Instead,
file Form 1065. See Pub 541 for more details.

Exception—Qualified joint venture. If
you and your spouse materially participate
(see Material participation beginning on
page C-2) as the only members of a jointly
owned and operated business, and you file
a joint election to be taxed as a qualified
joint venture instead of a partnership. To
make this election, you must divide all
items of income, gain, loss, deduction, and
credit between you and your spouse in accordance
with your respective interests in the venture.
Each of you must file a separate Schedule C or C-EZ.
On each line of your separate Schedule C or C-EZ, you
must enter your share of the applicable income,
deduction, or loss....

[Gretel]

Didn't pay attention to the word "joint". Oh well.