It is important to understand that the federal income tax treatment for spouses residing in a community property state and holding the entity as community property in this scenario is elective.
Per Rev. Proc. 2002-69, the IRS will accept either treatment as two separate businesses (reported on Schedule C) or a partnership (reported on Form 1065).
See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf
