I turned a sole-proprietor into an LLC in Arizona a communal property state. Do I need to separate business expenses into separate Schedule C or can I just file one?

[windwrd01]

We each own 50% in the LLC but I'm the Manager. She does not work in the LLC in any way. The business had no profit for the year and will incur a large loss. What are the implications if I just file one Schedule C? My spouse is a fulltime student and does not work.

[KarenL2 · Accepted solution]

Since you are a multi-member LLC in Arizona (and both members are spouses), you will have to file two Schedule Cs, one for each of you.  You will split the income and deductions 50/50 on each Schedule C.

[windwrd01]

How do I split the expenses 50/50 when they are from multiple sources?

[KarenL2]

All the business expense for the LLC would be split 50/50 regardless of the source of the expense.

[windwrd01]

I understand that so do I take each line item and divide by two? Do I do the same for COGS?

[KarenL2]

Yes.  That's exactly correct.