16. September 2007 by Tim Collier.

Husband and wife LLC’s have always been a great idea from a liability stand point, but they  have added another layer of tax complication because they require the completion of a partnership (Form 1065)return in addition to the couples individual tax return.  The SMALL BUSINESS AND WORK OPPORTUNITY TAX ACT OF 2007 has changed that.

The new law allows LLC’s that are owned by husband and wives not to be treated as partnerships for federal tax purposes.  They must meet three criteria:

1)    The only members of the LLC are husband and wife.

2)    Both spouses materially participate in the business and

3)    Both spouses elect to have provision apply.

This change is effective for all tax years after 12/31/06. Under the provision a joint venture conducted by a husband and wife is not treated as a partnership and should be reported on the appropriate form on their 1040 (Sch C).  Each spouse must still report the income on their own schedule C and have their own schedule SE. The income will still have to be split by ownership percentage, however this should still reduce the preparation fees, by staying away from the form 1065 partnership return.  This is a great benefit for husband and wife owned LLC’s and should help lower the overall bookkeeping charges to the business.

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16. September 2007 by Tim Collier.

Glad you could visit.  This blog is geared towards business topics and how to make your venture successful.  Please feel free to post and ask about any topics that you are interested in and we will try to get them on the blog as soon as possible.

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