Husband and wife start a small family business.
And they want to keep things simple.
(Since neither is fond of formalities.
Or too much paperwork.)
At the same time, they do want to make sure they
1. Use the right business organization type for them, and
2. They employ the right tax strategy.
After some research they both decide Qualified Joint Venture meets most of their requirements.
What is a Qualified Joint Venture (QJV)?
As its name imply, QJV is a joint venture where both spouses materially participate in the business.
And elect not to be treated as a partnership.
For federal income tax reporting they are treated as sole proprietors.
The business’ income, deductions, and credits are allocated to each spouse.
(On separate Schedule C.)
According to each one’s interest/participation in business.
IRS requirements for QJV
For the husband and wife business owners (aka the averse-to-paperwork team) the QJV seems to fit the bill for what they want.
But are they eligible for it?
IRS’ requirements for a business to operate as QJV
- Not incorporated: if your business is incorporated then you no longer fit the QJV requirements
- Partnerships: with the exception of general partnership no other type of partnerships qualify for the QJV.
- LLCs: if you reside in a community property state, an LLC does qualify for QJV (just like a general partnerships).
- Husband and wife must be the only owners of the business AND materially participate in the business’s operations.
- They must file a joint income tax return.
Our friends, the husband and wife business owners, have decided on QJV.
Now they need to move on to the next decision on their agenda:
Who’s the boss?
Thanks for visiting.