March 24, 2020 0 comment

Tax Benefit of Going Into Business With Your Spouse

I want to share with you a benefit of going into business with your spouse.

Normally when two people go into business together we call that a partnership and those two people have to file a partnership tax return at the end of the year. Of course filing a partnership tax return costs you more money, it makes your tax position a little bit more complicated, it takes a little bit more time. It’s not something that everyone wants to do. Well if your partner is your spouse then you may not actually have to file a partnership tax return. Instead you might be able to treat your spousal business, which we call it qualified joint venture. You might be able to treat that as two sole proprietorships so instead of filing a partnership tax return at the end of the year, you just file your personal tax return and you file two schedule C businesses in your personal tax return. That’ll save you from filing the partnership tax return. In order for this to work of course the only partners in the business are you and your spouse, both spouses have to materially participate. Both spouses have to file a joint tax return. You can’t file separate returns and both spouses have to agree to file this way. So if you can check those boxes, you can file as a qualified joint venture and avoid filing a partnership tax return.

Now if you don’t hit those boxes, lets say you file separately or have a cantankerous relationship and you guys can’t agree how to file your taxes then you have to file a partnership return. That, by the way, all by itself should be enough motivation to alleviate your cantankerous relationship. You should be able to find common ground in avoiding an extra tax filing.

If you have any questions about it, if you have a spousal business, contact me. I’d love to talk to you about that and many other benefits for having a business and also working with your spouse. I can save you a lot of money here at Etrends Tax and Accounting.