Assuming the following:
1. This is a joint venture
2. You both materially participate
3. You did NOT incorporate or form an LLC,
then you have two options.
1. One spouse is the sole proprietor and files the business on schedule C. The other spouse is an employee of the business, and is paid a salary on a W-2 or is paid as an independent contractor on form 1099-NEC. Spouse 1 deducts the payment to spouse 2 as a business expense, and spouse 2 reports the income in their name.
2. File as a qualified joint venture. This is allowed when the only business participants are spouses and the business is not incorporated or an LLC. Each spouse includes a schedule C on their tax return reporting half the business income and half the expenses. Both schedule Cs can be part of one joint return for married filing jointly. The net income (profit) from the business flows to the main form 1040 where it is combined with any other income, deductions and credits to determine the final amount of tax owed.
There are many other aspects to reporting a sole proprietorship (or 2 sole proprietorships in this case) and you may indeed want professional guidance at least the first year.
If the business is incorporated, or formed as an LLC, or if you have other partners besides just two spouses, you need to see a professional ASAP because the filing choices are different and you are already subject to substantial late fees.
