Have a mom-and-pop shop? You might consider filing a QJV for tax purposes. It’s a separate term for a business that is jointly owned by a two spouses, that is unincorporated and not an LLC (with one exception, below). Instead of filing a partnership tax return, Qualified Joint Ventures allow you to file as a sole proprietorship. Get to know the benefits and how to’s below.
The key reason is to simplify filing. To file partnership tax returns (Form 1065) as a couple would be complicated and expensive. Additionally, both spouses receive Social Security/Medicare credits for business profits.
There’s no formal filing of a QJV, because it’s not a business legal type. However, you’ll need to include the forms detailed below in place of corporate/partnership tax returns.
Besides the requirements of marriage between the owners and the business being incorporated, the spouses also have to share net income and deductions in the same proportion as each person’s interest in the business (their percentages in the partnership agreement), there cannot be additional partners in the business, both spouses must participate in the business, each spouse must submit a Schedule C and Schedule SE, and one spouse must be designated as responsible for paying employment tax if the business has employees.
If you have an LLC, you can file a QJV only if you and your spouse own the business in a community property state.
Be sure each spouse files a Schedule C to qualify. On this form, each spouse claims their income based on the gross income of the business. For example, if the gross income of the business was $500,000 and each spouse splits the profits of the business 50/50 in the partnership agreement, both spouses would claim $250,000 on their Schedule C. Expenses and profit must also be calculated accordingly and included on each Schedule C.
Filing a qualified joint venture is a great concept for married couples that want to save time and money. Instead of filing a corporation or partnership tax return, you can focus more time and investment on growing your business together. Considering the requirements and informality of filing for Qualified Joint Ventures, always consult your trusted tax professional to ensure you’re crunching the numbers correctly for maximum benefit.
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