Discussion:LLC with husband and wife members
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Discussion Forum Index --> Tax Questions --> LLC with husband and wife members
Tiredoftaxes (talk|edits) said: | 14 April 2008 |
| I have a new client who just gave me data. They started an LLC during 2007 but never got a tax ID. The husband and wife are both members. The business existed for about 6 months during the year. He contracted with companies under his LLC name. However, since they didn't get tax id, the 1099-misc's were sent to him under his SS# under his name and then D/B/A the LLC. I need to file extensions, but do I need to get tax id for LLC as partnership and file a partnership extension? Or since it is under his SS#, do I forget about the LLC. Help!! | |
| 14 April 2008 | |
| I'd file as Scd. C with clients consent. I don't see why they still can't operate under the LLC. H-W who are the sole owners of a business, who both materially participate in the business, and who file a joint return can elect to file as sole proprprietors starting with 2007 returns. Follow 2007 instructions to Scd. C for reporting the respectives shares. | |
Tiredoftaxes (talk|edits) said: | 14 April 2008 |
| The husband did all of the work, do you think that I should just give him all of the income since the 1099's are under his name? With regards to the consent, should I just create some type of statement regarding the options and let him choose? What is the chance that the IRS would catch that if there never was a tax id requested? | |
| 14 April 2008 | |
| Your saying they never got a tax id for the partnership? Does not sound as if it even existed as a partnerhsip to me.
What's there for the IRS to catch, there's no mystery or hiding to it. The Husband did all the work, no 1099's to anyone but him, put him on Scd. C. Theoretically, there are legal consequences here for the wife, it could be remotely argued that her expectation of being in a partership has been deprived of her. My response would be, what partnership? You never ran it as one. Discuss it with them. Keep it as simple as possible. | |
Tiredoftaxes (talk|edits) said: | 14 April 2008 |
| The IRS wouldn't look at it as the husband trying to avoid FICA since he is already at his wage max with his other job? | |
| 14 April 2008 | |
| Why come? He's (or they are) reporting business income on Scd. C, and SE tax will be calculated [Scd. SE will generate on your software for the return]. If he's maxed out already, he should only owe additional medicare amt. | |
| 29 April 2008 | |
| I don't know why this has to be so complicated. Very similar situation as above, except LLC organized in November 2007, wife/husband as members and with a FID #. In this situation, the husband works full-time W-2 job and the business is really all the wife's. I don't think I have an issue for 2007, because all they did was incur start-up/organization expenses and business really did not begin until 2008. I'm not going to report anything for 2007, but I'm just wondering if it wouldn't be just as easy to file a 1065 (no activity for 2007) then to have to file 2 Sch C, split income/expenses, especially since it's really just the wife doing everything. I think the intent is for this business to develop to the point where the husband would become involved and both would work FT in LLC business. But, for 2007, I just need to decide if filing initial 1065 or nothing (for no activity Schedule Cs). I probably won't do anything for 2007. Any thoughts? Thanks. | |
| 29 April 2008 | |
| I am pretty sure I am not the only one who read the guidelines from the IRS about husband/wife partnerships. It specifically stated that if an LLC was formed under state law, it did not qualify for Schedule C treatment. | |
| 29 April 2008 | |
| Disregarding the above since we're dealing with 2007 and beyond - any thoughts? | |
RoyDaleOne (talk|edits) said: | 29 April 2008 |
| In my way of thinking you need to file an 1065 for 2007, even if it is a no activity return.
Note, in this situation I would, if the return is late, not include any partners in the filing. Normally, I get a notice after the FEIN number is obtained as to what the IRS thinks I should file. | |
| 29 April 2008 | |
| In reference to the above contradiction:
http://www.irs.gov/businesses/small/article/0,,id=177376,00.html | |
| 29 April 2008 | |
| There is no other way to form an LLC except under state law. Hmmm, so Okie is saying that if they form an LLC, then H-W cannot go on Scd. C (even though this would normally be permitted), and they must file the 1065.
Thanks for your link too Ww. Well, let me add this to the list of things I need to look into. | |
| 30 April 2008 | |
| Thank you, Joyce, this is what I was looking for. I saw nowhere in the instructions for Sch C where this election included LLC and clearly it does not. I wish to goodness that they had not included both spouses in LLC, but now I guess we're stuck with 1065. I stand corrected, and appreciate doing so. Thank you. | |
| 30 April 2008 | |
| The wife does the work, community property state, H-W LLC, husband has full time work outside the LLC. In applying for an EIN, sign up as partners or as sole P, disregarded entity. In Comm property states you are allowed to choose. Is it better for SS wages to form a partnership to disburse income and distributions? | |
| 30 April 2008 | |
| CrowJD and LJA - there is reason for the confusion, as another IRS page doesn't mention this. Hence, why we are not allowed to rely on pubs, I guess. Although it is a link from the first reference, you could get to it by other means: http://www.irs.gov/businesses/small/article/0,,id=97732,00.html
Seashell, there is also a mention in the above reference to see the special rules for community property states: "See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to husband and wife state law entities in community property states." | |
Donniecastleman (talk|edits) said: | 1 May 2008 |
| At times like these, I love being in the peanut gallery watching the ball get batted back and forth by the best of the best. | |
