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The Qualified Joint Venture - Frequently Asked Questions

How a Husband-Wife Business Can Elect Not to be Treated as a Partnership

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The IRS recognizes that a husband-wife business is unique, so they have made an exception for this type of business, to make it easier for the husband and wife to file tax returns without having to file a complicated partnership tax return. The IRS calls this a "Qualified Joint Venture (QJV)."

Disclaimer: The information in this article and on this GuideSite are for general information purposes only; it is not intended to be tax or legal advice. Each situation is specific; consult your CPA or attorney to discuss your specific business questions.

1. What is a Qualified Joint Venture?

A qualified joint venture (QJV)is not a business legal type. It is a concept developed by the IRS to allow husband-wife partnerships that meet certain requirements to file their business taxes as sole proprietorship, using two Schedule C forms. Filing Schedule C forms is cheaper than filing a partnership tax return and Schedule K-1. Learn more about the requirements to file as a QJV in this article.

2. What is the Benefit of Filing Business Taxes as a Qualified Joint Venture?

If you meet eligibility requirements to elect to be taxed as a qualified joint venture (QJ) there are several benefits in taking this election: 1. Cheaper, easier to file business tax returns, and 2. Both spouses receive Social Security/Medicare credits for business profits. Read more about these benefits in this article.

3. Can My Husband-Wife Business Elect to Become a Qualified Joint Venture?

Your husband-wife business may be eligible to file business taxes as a Qualified Joint Venture (QJV), if you meet certain criteria:

  1. Your business may not be a corporation. (Your husband-wife business is typically a partnership.)
  2. The husband and wife must be the only people in the business
  3. They must file a joint tax return
  4. They must both materially participate in the business during the year, and
  5. Both spouses must agree not to be treated as a partnership (in other words, both must file a Schedule C).

4. How Do I Complete a Schedule C for a Qualified Joint Venture?

You actually will need to complete two Schedule C's - one for each spouse  Each Schedule C should show that persons share of each item of income and expenses.  For example, if your husband-wife business had gross income of $100,000, and the partnership agreement designates that all income be split 50/50 between husband and wife, each Schedule C would show $50,000 in income.  Read the article for more details.

5. Can a Husband-Wife LLC Become a Qualified Joint Venture?

The IRS specifically excludes "state entities" (that is, LLCs) from electing to file business taxes as a Qualified Joint Venture.  But there is one "loophole" in this restriction: LLCs in community property states may file as a QJV.  Read more about community property states in this article.

6. What if I File as a Qualified Joint Venture Incorrectly? What Do I Do?

If you file as a qualified joint venture incorrectly, when you were not eligible to do so, you will need to file an amended tax return for that year.  The new tax form will need to be a partnership tax return.  If you think you have made a mistake in filing as a qualified joint venture, see your tax advisor for help with this filing.

7. How Does Self-Employment Tax Work for a Qualified Joint Venture?

The husband and wife in a qualified joint venture are both eligible for, and must pay, self-employment tax (Social Security and Medicare for self-employed business owners).  Read this article to see how self-employment tax is figured for a qualified joint venture.

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