Thanks ... this (and the other responses) clear it up quite a bit. We do meet all the requirements for Sched C, but we may as well continue with 1065/K1. I was freaking out because I did find one post where the person was saying that filing the 1065 was flat wrong and could trigger an audit. And since I read it on the internet it must be true lol. But what you and the other responders are saying makes perfect sense.
My wife is actually a CPA, and she thought we'd done it right. But she hasn't done tax practice for a very long time so she was a bit unsure of herself.
