is now 
Many married couples enjoy the satisfaction and control of running their own business together. In time, the question of operating the business as a partnership or a sole proprietorship arises.
There are number of factors to consider, but generally, a “sole” proprietorship must be “solely” owned by one spouse. The other spouse would be considered an employee and would be paid to work the business.
When both spouses are working the business together and that business is jointly owned by both spouses, then that business is generally classified as a partnership for Federal tax purposes.
A partnership classification requires both spouses to follow more stringent record keeping and filing requirements including filing a partnership separate income tax return.
Sometimes married co-owners fail to file properly as a partnership by reporting on a Schedule C in the name of one spouse. The result is that only one spouse receives credit for Social Security and Medicare coverage purposes.
In order to work out the issues for couples who jointly own, but want to avoid some of the partnership filing and record keeping requirements, spouses can elect to be treated as a Qualified Joint Venture. This follows the provisions of the 2007 Small Business and Work Opportunity Tax Act.
The Qualified Joint Venture classification provides that each spouse separately reports a share of all of the businesses’ items of income, gain, loss, deduction, and credit. Under the election, both spouses will receive proper credit for Social Security and Medicare coverage.
Each spouse must file a separate Schedule C (or Schedule F) to report profits and losses and, if otherwise required, a separate Schedule SE to report self-employment tax for each spouse.
Sound complicated? It can be. It depends upon the kind of business you own and operate, and your goals. This issue is first a strategic tax planning consideration. Here are just a few of the many questions to answer before making a choice: What are your long-term goals? What would happen if one spouse leaves or dies? What kind of record keeping system works best for you and your spouse?
These issues are best resolved with the advice of an experienced professional. Contact us for an appointment today at McRuer CPAs where we will help you find the solution that best fits you. Call us at: (816) 741-7882.
Here's more information from the IRS: http://www.irs.gov/businesses/small/article/0,,id=177376,00.html
