New law - Husband & Wife LLC members

Collapse
X
 
  • Time
  • Show
Clear All
new posts
  • AZ-Tax
    Senior Member
    • Feb 2008
    • 2604

    #1

    New law - Husband & Wife LLC members

    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
    Senior Member
    • May 2006
    • 123

    #2
    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.)

    Comment

    • myerstaxes
      Senior Member
      • May 2006
      • 123

      #3
      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

      Comment

      • les grans
        Senior Member
        • Jun 2007
        • 155

        #4
        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?

        Comment

        • Kram BergGold
          Senior Member
          • Jun 2006
          • 2112

          #5
          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.

          Comment

          • Gretel
            Senior Member
            • Jun 2005
            • 4008

            #6
            Yes, I agree with splitting any way, whatever is appropriate. It should reflect the involvement or each.

            Comment

            • taxxcpa
              Senior Member
              • Nov 2007
              • 978

              #7
              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.

              Comment

              • joanmcq
                Senior Member
                • Jun 2007
                • 1729

                #8
                That treatment is only available in community property states. In other states, you cannot file a joint Sch C.

                Comment

                • JON
                  Senior Member
                  • Jul 2005
                  • 1265

                  #9
                  You can file

                  joint schedule Cs in any state.

                  Comment

                  • Gretel
                    Senior Member
                    • Jun 2005
                    • 4008

                    #10
                    Originally posted by JON
                    joint schedule Cs in any state.
                    ...now because the law was changed to make this possible for all states.

                    Comment

                    • Bees Knees
                      Senior Member
                      • May 2005
                      • 5456

                      #11
                      Originally posted by JON
                      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....

                      Comment

                      • Gretel
                        Senior Member
                        • Jun 2005
                        • 4008

                        #12
                        Didn't pay attention to the word "joint". Oh well.

                        Comment

                        Working...