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My wife and I have a two member LLC. We are filing a joint return. Can I report the LLC on a Schedule C or do I need to file a 1065?

We formed the LLC in November of TY 2016. The past three years we reported the home-based travel business on Schedule C.

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New Member

My wife and I have a two member LLC. We are filing a joint return. Can I report the LLC on a Schedule C or do I need to file a 1065?

It depends on the state where the LLC is incorporated.

If you are in a non-community property state, you will need to file a Form 1065.

According to the IRS, if an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses

If you are in a community property state ( Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin), you have a choice.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

  • Disregarded entity for federal tax purposes (a Schedule C filing), the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
  • Partnership for federal tax purposes (a Form 1065 filing), the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.

A business entity is a qualified entity if:

  1. The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
  2. No person other than one or both spouses would be considered an owner for federal tax purposes; and
  3. The business entity is not treated as a corporation under IRC §310.7701-2.

For more information see Single Member Limited Liability Companies

To file a Form 1065, you will need TurboTax Business, you can download a copy here

View solution in original post

3 Replies
New Member

My wife and I have a two member LLC. We are filing a joint return. Can I report the LLC on a Schedule C or do I need to file a 1065?

My wife and I live in CA.  Have two rental properties in the LLC.  Can I still report on a Sch C or do I have to file a 1065?
New Member

My wife and I have a two member LLC. We are filing a joint return. Can I report the LLC on a Schedule C or do I need to file a 1065?

It depends on the state where the LLC is incorporated.

If you are in a non-community property state, you will need to file a Form 1065.

According to the IRS, if an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be "qualified joint ventures" (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses

If you are in a community property state ( Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin), you have a choice.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

  • Disregarded entity for federal tax purposes (a Schedule C filing), the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
  • Partnership for federal tax purposes (a Form 1065 filing), the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.

A business entity is a qualified entity if:

  1. The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
  2. No person other than one or both spouses would be considered an owner for federal tax purposes; and
  3. The business entity is not treated as a corporation under IRC §310.7701-2.

For more information see Single Member Limited Liability Companies

To file a Form 1065, you will need TurboTax Business, you can download a copy here

View solution in original post

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Level 15

My wife and I have a two member LLC. We are filing a joint return. Can I report the LLC on a Schedule C or do I need to file a 1065?

"Can I report the LLC on a Schedule C or do I need to file a 1065?"

You need to file a 1065 unless you and your wife own the LLC as community property under the laws of a community property state, there are no other owners of the LLC, and the LLC is not treated as a corporation.

See Joint Ownership of LLC by Spouse in Community Property States --> https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-compan...