You can't file one SCH E for more than one person. Period. There can only be one owner of a single member LLC. There are no exceptions. That's why it's called a *single* member LLC. So your wife helps. Big deal. I'm self-employed with a single member LLC and my wife helps sometimes too. So what? I guess I'm not understanding what is so confusing to you about this.
" my wife helps in the business and a small portion of total earnings "
What about small portion of total earnings? Either she is a paid W-2 employee of your single member LLC, or she is not. It sounds to me like you're making mountains out of nothing. There's not even a mole hill here. Or has there been a falling out and she's threating to sue you for back wages? If so, it's a waste of time if you live in a community property state. Upon divorce, she get's half the business earnings just because she was married to you. Doesn't matter if she worked for you or not. Doesn't matter if you paid her to work for you or not either.
"didn't make sense to add the w2 overhead"
If in my business my wife regularly participated in my single member LLC, it would not make sense to *not* hire her as a W-2 employee. Her wages can be used to figure her retirement contribution to her 401(k) I would establish for her, and her wages as well as the employer side (that's me) of any contributions to her retirement account would be a tax deduction for my business. That would reduce the self-employment tax on my business income quite a bit.
