Do you run a business with your spouse? This comes with unique tax obligations. Here’s how to ensure you’re in compliance.

What is a husband and wife LLC?

A husband and wife LLC is a limited liability company owned solely by a married couple. This type of LLC offers the legal and financial protections of an LLC while allowing the couple to manage and run the business jointly.

How is a husband and wife LLC taxed?

Generally, a multi-member LLC is classified as a partnership for federal tax purposes, meaning, unless it elects otherwise, it must file Form 1065 (U.S. Return of Partnership Income).

What is the qualified joint venture exception?

If the entity is owned solely by a married couple in a community property state, the IRS allows them to elect to be treated as a disregarded entity (sole proprietorship) instead of a partnership. This removes the filing requirement of a partnership tax return, and the owners each report their share of the income on their own Schedule C (it is important to split the income between the 2 Schedule Cs so the social security earnings are properly credited between the spouses).

The requirements are:

1. The only members of the joint venture are a married couple who file a joint tax return.
2. Both spouses materially participate in the trade or business
3. Both spouses elect not to be treated as a partnership.

Community property states include AZ, CA, ID, LA, NV, NM, TX, WA, and WI.

If not in a community property state, a husband and wife entity is treated as a partnership by default and must file Form 1065.

Please note: A business that is in the name of a state law entity (including an LLC or LP) cannot qualify as a qualified joint venture.

Can a husband and wife LLC choose S corporation or C corporation status?

Yes, the couple can also elect an S corporation or C corporation structure.

What are the tax obligations for RI based LLCs?

Rhode Island imposes a minimum business corporation tax of $400 on LLCs, even if they have no income.

This tax is generally reported and paid on RI Form RI-1065 (Partnership Income Tax Return).

If a Rhode Island business is not organized as a state law entity (i.e. a sole proprietorship or general partnership), then the $400 minimum tax would not apply.

RI LLCs must file an Annual Report with the Secretary of State and pay a fee ($50 for domestic LLCs).

What is the filing deadline?

Form 1065 for calendar year LLCs is due March 15 (or September 15 with an extension). RI tax returns & minimum tax payments are typically due on March 15^th.

Do husband and wife LLCs owe self-employment taxes too?

Unless they elect S or C corporation status, LLC members are subject to self-employment tax on their share of the partnership’s income.

Do husband and wife LLCs need to pay estimated taxes?

Yes, if the LLC generates income, the individual owners may need to make quarterly estimated tax payments to the IRS and state division of taxation.

What about Rhode Island Pass Thru Entity Taxes?

Please see our blog RI Issues Guidance on Pass Through Entity E-Filing Mandate which discusses RI Pass Thru Entity taxes.

Wondering if you’re meeting all your filing obligations? We can help.