We have 2 DBAs under 1 LLC. Husband and wife owned in a unity state. Do we list each DBA separately as income earned or combine and list only LLC?

[Anonymous]

Should we list each DBA separately as income earned or combine all profits and losses while listing just the LLC that both of these DBAs fall under?

[Anonymous_ · Accepted solution]

If you own more than one business, you should complete a separate Schedule C for each business,

See https://www.irs.gov/instructions/i1040sc#idm140229426651824

[Opus 17 · Accepted solution]

You own only one business, that is your LLC. If you choose to operate under two different DBAs, that is a matter for state regulation, not the IRS. Because you choose to perform both sets of business activities under the single LLC, you must file a single tax return for the LLC.

Under most circumstances, an LLC with more than one member or owner must file a form 1065 partnership tax return. This creates a K-1 statement for each partner that is entered on the partners personal tax return.  However, if you live in a community property state, and if the only two members of the LLC are spouses, then you may file as a qualified joint venture.  You will file 2 schedule C ‘s, one in the name of each spouse, and each LLC will list half the business income and half the expenses. 

[Anonymous_]

The above answer is incorrect.

A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity. However, if the entity is owned by a husband and wife as community property under the laws of a state, as is the case here, then the entity is a qualified entity and can be treated as disregarded for federal income tax purposes.

See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

If the LLC is treated as disregarded, then separate Schedules C can be filed and a Schedule C should be filed for each separate business as per IRS instructions.

[Opus 17]

I’m not sure why it’s necessary to quibble over the term “qualified entity“, or “qualified joint venture“. The end result is the same. If in a community property state, the two spouses who own an LLC may file 2 schedule C’s that each report half the business income and expenses.

I do not believe it is correct or appropriate to file as two separate businesses (which would require 4 schedule C’s) just because the spouses are doing two sets of business activities as DBAs under the same LLC.  If the business activities are so separate and distinct that they can’t be listed as a single business, then the spouses need two different LLC ‘s. If the activities and expenses are similar enough to be run under 1 LLC, then it doesn’t matter if they use two different DBAs.

[Anonymous_]

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@Opus 17 wrote:

I’m not sure why it’s necessary to quibble over the term “qualified entity“, or “qualified joint venture“. The end result is the same.

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Because they are what is referred to "terms of art"; they each have a specific meaning.

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@Opus 17 wrote:

I do not believe it is correct or appropriate to file as two separate businesses (which would require 4 schedule C’s) just because the spouses are doing two sets of business activities as DBAs under the same LLC. 

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The fact that they have the same LLC is irrelevant since it is disregarded for federal income tax purposes. If the two businesses that are being operated are separate and distinct, then a Schedule C should be filed for each one (if they decide to make the election to be treated as a qualified entity rather than a partnership).

As far as what you believe, that is largely irrelevant; you need to cite authority for your stated proposition (or at least guidance from an official source).

[Opus 17]

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@Anonymous_ wrote:

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As far as what you believe, that is largely irrelevant; you need to cite authority for your stated proposition (or at least guidance from an official source).

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Here are a series of articles that all note that the IRS expects the LLC to file a single return, and that different business lines can't be separated.  (None of these articles is what I would consider a AAA quality source, but this is what I was able to find on short notice.)

https://www.upcounsel.com/how-many-dbas-can-an-llc-have

https://info.legalzoom.com/article/can-llc-have-more-one-dba

https://yourbusiness.azcentral.com/can-one-llc-two-dbas-1659.html

https://www.govdocfiling.com/faq/can-multiple-dbas-llc/

Note that the are several possible difficulties of running two DBAs from one LLC.  Since you can't separate finances, you can't show a deductible loss if one DBA does worse than the other.  Also, if one DBA has debts it can't pay, the creditors can come after the other DBA since they are all owned by the same LLC.  

As I said before, we also don't know if the taxpayer here has made 2 DBAs for purposes of marketing the same essential service to different groups (such as a general contractor marketing themself as a roofer and as a bathroom remodeler) or if they have two distinct and separate business activities.

If this is a case of 2 distinct business activities, I believe the web sites I cite indicate that all the income and expenses still must be reported as a single LLC.  And since this is a spousal LLC in a community property state, that means "qualified entity" and filing 2 schedule Cs.

If the businesses are distinct and the taxpayer wants to keep them separate, I believe the taxpayer needs to move one of the businesses to a different LLC or take it out of the LLC and make it an unincorporated partnership that can be treated as a qualified joint venture.

Legal help in your state may be advisable. 

[MSCO9241]

also in a non-community property state, a multi-member LLC must file a partnership return - even husband and wife. 

[Anonymous_]

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@Opus 17 wrote:
If the businesses are distinct and the taxpayer wants to keep them separate, I believe the taxpayer needs to move one of the businesses to a different LLC or take it out of the LLC and make it an unincorporated partnership that can be treated as a qualified joint venture.

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I am certain the IRS could not care less how the taxpayers structure their businesses, but if the two businesses are separate and distinct, they need to file separate Schedules C for each.