An LLC for a married couple is a business structure that allows spouses to jointly own and operate a company while providing liability protection and potential tax benefits.
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Having a husband and wife LLC can be a great business decision, but it can also be complicated. The state the married couple is in will determine whether they can file as a single-member LLC or a multi-member LLC.
Starting a limited liability company can be great for both federal tax purposes and personal liability. Unlike a sole proprietorship, an LLC provides limited liability protection to the owners to protect their personal assets from the liability and debts of the business. However, when any two people are involved in a business together it’s essential to have a clear partnership agreement.
Having co-ownership of an LLC with your spouse has its advantages. You’ll both be members (owners) of the LLC and share in the work and responsibilities for the business. Having a partner also allows you to bounce ideas off of one another.
If a married individual wants to file an LLC with their partner, what state they’re in will determine whether they can be considered a single-member LLC or if they must form a multi-member LLC (see definition). In some states, a sole business owner is the only person who can file a single-member LLC. However, this isn’t the case in all states.
There are nine community property states in the U.S. If the couple is in a community property state, then they will have the option to file as a single-member LLC. Those that live in non-community property states don’t have this choice and must file as a multi-member LLC.
When you’re creating a business entity, you have so many different decisions to make. From figuring out business expenses to picking a registered agent, there are a lot of different things to do. One of the most important things to make sure you’re clear about is taxes. Forming a business can change your tax experience, so you may want to speak with tax professionals about your options.
The Internal Revenue Service does allow married couples who have a qualified joint venture to file a joint tax return.
According to the IRS, a qualified joint venture is a business where:
(1) The owners of the company are a married couple who file a joint return,
(2) both spouses contribute to the business, and
(3) both spouses choose not to be treated as a partnership.
Usually, a company co-owned by a married couple would be considered a partnership for federal tax purposes. But that means complying with recordkeeping and filing requirements for a partnership. Filing as a qualified joint venture eliminates the need for filing a partnership return, so long as each spouse separately reports a share of all of the business’s income, gains, losses, deductions, and credits.
When it comes to having a married couple LLC, filing a joint return can make taxes simpler. If the married couple decides to file their business as a partnership, then their tax deadline gets moved up to March 15. They will also have higher consequences if their partnership tax return is filed late.
Many of the requirements for forming an LLC for married couples are similar to the requirements for partnerships. When they’re filing their Articles of Organization (or other LLC formation documents), they’ll need to have chosen a business name and appointed a registered agent. Another thing needed (if not always required by law) is an operating agreement.
An operating agreement is essential when it comes to married couples jointly owning an LLC. The operating agreement should define how ownership is divided, how the LLC will be managed, how disputes will be handled, what happens if the couple divorces or one wants to leave the business, and what happens if one spouse becomes incapacitated or dies.
Despite what’s established in your operating agreement, though, if you live in a community property state and divorce, the court will split the LLC 50/50.
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Creating an LLC can be complicated, but it’s essential that you do it right. If you’re wanting guidance from a professional, our team is here to lead you through the process and provide education about all the necessary steps. Working with us means you won’t have to question whether or not your business is being set up correctly.
Disclaimer – The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Is a married couple considered a single-member LLC?
A married couple can be considered as a single-member LLC if they live in a community property state. If the married couple doesn’t live in one of those states, they can still both be involved in the LLC. However, their business structure won’t be considered a single-member LLC.
Should both spouses be in an LLC?
Whether or not both spouses are in an LLC is a very individual decision. Business owners sometimes prefer to keep their personal and professional relationships separate, while joining up on business ventures is a goal of other couples. If both spouses are in an LLC, there should be a clear operating agreement in place.
What type of LLC should a married couple have?
That’s a personal choice, but the choice may be limited by the state you live in. A married couple with an LLC in a community property state can file as a single-member LLC, though they would be considered a multi-member LLC in a non-community property state. As we mentioned earlier, filing as a single-member LLC can can eliminate the paperwork required for a partnership.
Can married couples jointly own an LLC?
Having both husband and wife owners of an LLC is possible. If they live in a common law state, then they are considered a partnership for federal tax purposes. While an individual owner is the only way to have a single-member LLC in most states, there is an exception when it comes to community property states.
Is starting an LLC with your legal partner a binding partnership?
The owners of the LLC will be legally responsible for the business until formal changes are made that move ownership to someone else.
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