Question

How do I join my wife's existing sole Proprietorship to form qualified Joint Venture?

Forum|Forum|2 years ago
February 13, 2024
1 reply
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My spouse operates a Sole Proprietorship providing Technology/Software services and previously served as a Business Analyst on a 1099 basis. Although she has not actively worked for the past few years, the Sole Proprietorship remains open and holds a Fictitious Business Name (DBA). I am considering utilizing her Sole Proprietorship (DBA) for my 1099 work as I embark on an independent contractor opportunity. Are we eligible to be classified as a Qualified Joint Venture? Is there a need for my wife to make any adjustments to her Sole Proprietorship to include me as a Joint owner, or are there any specific filings required? What steps should we take next to establish a Qualified Joint Venture, enabling me to proceed with pursuing the independent contractor opportunity and filing annual taxes?

Not A Product Question

PatriciaV

Yes, you may elect to be treated as a Qualified Joint Venture (QVJ) by filing a joint tax return that includes separate Schedules C for each spouse. The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse's interest in the business.

Basically, you input two separate businesses in TurboTax, one for each spouse. Be sure you mark which spouse owns each Schedule C business. This allows TurboTax to calculate self-employment taxes properly.

Note that only businesses owned and operated by the spouses as co-owners, that are not in the name of a state law entity (LLC) and without an EIN, may qualify as a QJV.

For more information, see IRS Election for Husband and Wife Unincorporated Businesses

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J

Joshraj75Author

Thank you for your response. It clarified the process of filing through TurboTax. However, I still have a question about whether I need to be formally added to my wife's Sole Proprietorship. I intend to use her DBA for my work as an independent contractor (C2C) on a 1099 basis. If we file taxes jointly with individual Schedule C forms, does that automatically qualify us as a Qualified Joint Venture (QJV)? Or are there specific changes required for my wife's existing sole proprietorship at the state level?

D

DianeW777

Yes, that would qualify you if you jointly own the businesses (hers and yours) and file two Schedule Cs.

An unincorporated business jointly owned by a married couple is generally classified as a partnership for Federal tax purposes. For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a "qualified joint venture," whose only members are a married couple filing a joint return, can elect not to be treated as a partnership for Federal tax purposes.

How to make the election: (As noted by @PatriciaV)

Spouses make the election on a jointly filed Form 1040 or 1040-SR by dividing all items of income, gain, loss, deduction, and credit between them in accordance with each spouse’s respective interest in the joint venture, and each spouse filing with the Form 1040 or 1040-SR a separate Schedule C (Form 1040 or 1040-SR), Profit or Loss From Business (Sole Proprietorship). For example, to make the election for 2022, jointly file your 2022 Form 1040 or 1040-SR, with the required schedules (see below). The partnership terminates at the end of the taxable year immediately preceding the year the election takes effect.

@Joshraj75

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