Understanding the "Qualified Joint Venture" for Spouses in Unincorporated Businesses
Wednesday April 9, 2008
The IRS has changed the reporting requirements for some types of businesses owned jointly by spouses. Here are the details :
- For tax years after 2006 (that means for your 2007 return)
- If you and your spouse own a business that is unincorporated (NOT a corporation or an LLC),
- You and your spouse can qualify as a "joint venture."
This means you can file using two Schedule C's instead of as a partnership.
To clarify, the IRS says you are a "qualified joint venture" if:
(1) the only members of the joint venture are a husband and wife who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership.
You make the election on your joint Form 1040 and you file separate Schedule C forms showing the percentage interest of each of the spouses on their respective Schedule C forms. For example, if your "qualified joint venture" showed a profit of $100,000, and you and your spouse had equal shares, you would each report $50,000 profit on your own Schedule C. The full $100,000 would be shown on the Form 1040.
If you already have a partnership or LLC, read the Tax Information Bulletin for more information.
Comments
Isn’t an LLC an unincorporated business?
You are correct, Sara, that an LLC is not incorporated. For this purpose, the IRS specifically has a designation for an “unincorporated business.” Here is what the IRS says in their article on this subject:
“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 (including a general or limited partnership or limited liability company)”….