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Business & farm
So, as you are a resident of Washington State, you live in a state with "Community Property Laws" This is important specifically when a married couple [and only a married couple] are the two partners [and only two partners] in an LLC.
Summary Answer to your specific question
:
- Since you live in a Community Property State, the IRS disregards the fact that you operate an LLC {an "entity"] and instead treats you as if you are dual "Sole Proprietors" of this entity. This means that instead of filing a Form 1065 Partnership return which then submits to you as two individuals Schedules K-1 for each of you to use in your Form 1040 filing, You & Spouse may just file the Form 1040 but each of you has a separate Schedule C [using your personal SSN typically] with income and expenses allocated between each of you [possibly just dividing monetary entry in half, for example] and then each of you has to also have a Schedule SE and pay Self-Employment Tax [instead of having the LLC pay employer side and you personally pay employee side - its the same amount in total].
- You must enter in the Business Income Section as if you own two separate businesses, one in your name and one in your spouse's name - and allocate each entry from the previously combined Schedule C - income entries, expense entries, etc., into two separate Schedules C one for each of you and that in turn will generate two Schedules SE.
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DETAILED & COMPLEX & GENERAL Answer RE: LLC's & Married Couples as dual owners
- for the general case and for anyone else reading this answer about LLC's owned by a married couple.
This answer is only appropriate to the case where an LLC is co-owned by a married couple residing in one of the nine states with Community Property laws.
Please see below why it is that both spouses may file Schedule C and Schedule SE if the entity is organized as an LLC but because only two partners exist and the two partners are a married couple and the residence is in a Community property state and the couple chooses to file not as a Partnership (Form 1065) but as Sole Proprietors.
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As of 2007, any married couple living in a community property state who own, jointly and participate jointly an LLC may still consider the LLC to be a "disregarded entity" - called an SMLLC (single member llc), and each then can avoid filing a Form 1065 or other return and simply file, each, a Schedule C and SChedule SE to their joint or separate Form 1040s. For authorization, please read the citation incorporated below.
Who is eligible to file as dual Sole Proprietors and not require filing a Form 1065?
>>>>>>Married taxpayers who are domiciled in one of the following community property states:
- Arizona,
- California,
- Idaho,
- Louisiana,
- Nevada,
- New Mexico,
- Texas
- Washington, or
- Wisconsin.
Note that you allocate the income and deductions between the two Schedules C (and the resulting SE) according to some logical method. This way both spouses achieve their individual Social Security paid quarters status [and of course pay SE taxes!] 😉 - since FICA and Medicare goes to the individual credit and not the married couple as a couple.
BUSINESS product is not needed!
Any personal product will do - buy ANY version of personal product, preferably the DESKTOP - - and you can choose any version - although the basic is too basic for most - all versions produce the same forms - if unfamiliar with Schedule C, may be best to pay the additional cost of H&B
Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
It is possible for either the husband or the wife to be the owner of the sole proprietor business. When only one spouse is the owner, the other spouse can work in the business as an employee. If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business entity in which the husband and wife materially participate in such venture - see citation above as this is allowable for Federal taxation purposes only in Community Property states), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture. This is effective for taxable years beginning after December 31, 2006.
NOT INTUIT EMPLOYEE
USAR 64-67 AIS/ASA MOS 9301 - O3
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