Husband and Wife "Qualified Joint Venture"

Leave it to the feds to name a husband and wife unincorporated business as a "qualified joint venture". What that really means is that if you and your spouse are operating an unincorporated business jointly then you don't have to be treated as a partnership any longer. Prior to the Small Business and Work Opportunity Tax Act of 2007 a husband and wife who were operating a business together were technically a partnership and were required to file a partnership return. The change made in the recent tax law was designed to make filing our taxes easier.

LLC's are not a federal designation. They are a state recognized entity. A single member LLC is viewed by the IRS as a "disregarded entity" and the income or loss is reported as part of the individual's Form 1040. We made an assumption that the change made in the 2007 law would also apply to activities operated by spouses through a Limited Liability Company--that is not the case--this law does not apply to LLC's unless they are located in a community property state. If so, the rules are addressed at Rev. Proc. 2002-69.

From a practical point of view you only need to file your business activity in your personal Form 1040 as either a Schedule C or Schedule F activity and the election is made. More details on the election can be found by clicking on the title above.

Please feel free to let us know if you have questions on this or any other tax topic. Also let us know if there is a topic you would like addressed in a future posting to this blog.