Partnership Help---LLC

[Super Mom]

I have a return that was brought for me to review that had been done by someone else (not too good I might add!) My question is, this is not single member but it is husband and wife. The return was done on a Schedule C, and shouldn't there be 2 Sched C's distributing the profit so SE credits are right????? I really don't want to do a 1065 on this, was it done right with 1 Schedule C and 2 members that are husband and wife????

Thanks in advance for the wonderful help at this late hour!!!!!!!!!

Also, are the home office rules the same for LLC as Sole Proprietor?

[KBTS]

If the husband and wife partnership is organized under state law as an LLC, you cannot report the business on Sch C. The 1065 must be done and each spouse will receive a K-1. If they are a joint venture and not organized as an LLC, then the Sch C approach is correct.

[Acownt4it]

SuperMom
The Schedule C is a correct choice. My program has a box that I can check that splits the self employment income equally so I only have to do one Schedule C. I haven't had a situation (yet) with different % of ownerships, if I did, I assume I would have to do two Sch. Cs.

I am not sure about the home office expense.

KBTS:
Quoted from SB4-2

Husband-Wife Partnerships
New Law: Beginning in 2007, a qualified joint venture
whose only members are a husband and wife may
elect not to be treated as a partnership for federal
tax purposes. A qualified joint venture is
one where:
• The only members of the joint venture
are a husband and wife,
• Both spouses materially participate in
the trade or business, and
• Both spouses elect to have the provision apply.
All items of income, gain, loss, deduction and credit are divided
between the spouses in accordance with their respective interests
in the venture. Each spouse takes into account his or her respective
share of these items as a sole proprietor. Thus, each spouse
would account for his or her respective share on the appropriate
form (such as Schedule C). The new law is not intended to
change the determination under present law of whether an entity
is a partnership for federal tax purposes (without regard to this
election).

[KBTS]

If they are indeed an LLC, then Sch C is not the correct choice. They must file as a partnership

From the IRS Website:

A business owned and operated by the spouses through a limited liability company does not qualify for the election

Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states.

Here is the link to the IRS article:

http://www.irs.gov/businesses/small/article/0,,id=177376,00.html

[equinecpa]

I. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states.[/I]

And if they are in a community property state, they can file on Schedule C. Two schedule C's should be prepared .... I have 2 clients that I split schedule C income out for instead of filing a 1065.

[David1980]

• Both spouses elect to have the provision apply.
All items of income, gain, loss, deduction and credit are divided
between the spouses in accordance with their respective interests
in the venture. Each spouse takes into account his or her respective
share of these items as a sole proprietor. Thus, each spouse
would account for his or her respective share on the appropriate
form (such as Schedule C). The new law is not intended to
change the determination under present law of whether an entity
is a partnership for federal tax purposes (without regard to this
election).

This would require two schedule C's though, one for each spouse, unlike what the return Super Mom has has. Seems that the only time you could ever file 1 Schedule C for two people is in community property states and you still have to do two Schedule SE and divide it up for the SE. I think you can still do that, but only if it isn't a QJV and they live in community property state.

[Super Mom]

Thanks!!

Thanks so much for all of the great input!!!! The lady faxed me some papers today, and it appears they are a single member with the husband 100%. So if I'm reading right, because of the new 2007 law they can file Sched C and still have their Limited Liability status, I was told on another board that filing Sched C would cause them to lose their status is that right?

[Super Mom]

Does this matter?

I saw that the workman's comp company listed their legal status as and Individual, not an LLC, is there status shot?