Business Owned and Operated by Spouses

Official source

Generally, if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. You generally have to file Form 1065 instead of Schedule C for your joint business activity; however, you may not have to file Form 1065 if either of the following applies.

You and your spouse elect to be treated as a qualified joint venture. See Qualified Joint Venture next.

You and your spouse wholly own the unincorporated business as community property and you treat the business as a sole proprietorship. See Community Income , later.

Qualified Joint Venture

You and your spouse can elect to treat an unincorporated business as a qualified joint venture instead of a partnership if you:

Each materially participate in the business (see Material participation , later, in the instructions for line G);

Are the only owners of the business; and

File a joint return for the tax year.

Making the election will allow you to avoid the complexity of Form 1065 but still give each of you credit for social security earnings on which retirement benefits, disability benefits, survivor benefits, and insurance (Medicare) benefits are based. In most cases, this election will not increase the total tax owed on the joint return.

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Business Owned and Operated by Spouses

Official source

Generally, if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. You generally have to file Form 1065 instead of Schedule C for your joint business activity; however, you may not have to file Form 1065 if either of the following applies.

You and your spouse elect to be treated as a qualified joint venture. See Qualified Joint Venture next.

You and your spouse wholly own the unincorporated business as community property and you treat the business as a sole proprietorship. See Community Income , later.

Qualified Joint Venture

You and your spouse can elect to treat an unincorporated business as a qualified joint venture instead of a partnership if you:

Each materially participate in the business (see Material participation , later, in the instructions for line G);

Are the only owners of the business; and

File a joint return for the tax year.

Making the election will allow you to avoid the complexity of Form 1065 but still give each of you credit for social security earnings on which retirement benefits, disability benefits, survivor benefits, and insurance (Medicare) benefits are based. In most cases, this election will not increase the total tax owed on the joint return.