One spouse must solely own a sole proprietorship. The other spouse may work in the company as an employee unless the business meets the conditions mentioned below to be an eligible joint venture. Whether the spouses qualify and elect to have the company treated as a legal joint venture, or they conduct their business in one of the nine community property states, a business jointly owned and run by a married couple is a partnership (and should file Form 1065, U.S. Return of Partnership Income). By opting to register as a registered joint venture, a married couple who jointly own and operate a trade or company may have each partner regarded as a sole proprietor. Requirements for a qualified joint venture:
▪ The only members in the joint venture are a married couple who file a joint tax return,
▪ The spouses own and operate the trade or business or maintain a farm as a rental business without materially participating (for self-employment purposes) in the operation or management of the farm, and
▪ Both spouses must elect qualified joint venture status on Form 1040, U.S. Individual Income Tax Return, by dividing the items of income, gain, loss, deduction, credit, and expenses in accordance with their respective interests in such venture. Each spouse files with the Form 1040 a separate Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship), Schedule C-EZ (Form 1040), Net Profit From Business (Sole proprietorship), Schedule F (Form 1040), Profit or Loss From Farming, or Form 4835, Farm Rental Income and Expenses, accordingly, and if required, a separate Schedule SE (Form 1040), Self-Employment Tax, to pay self-employment tax.
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