Discussion:H/W election to treat LLC as a sole prop
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Discussion Forum Index --> Advanced Tax Questions --> H/W election to treat LLC as a sole prop
Discussion Forum Index --> Tax Questions --> H/W election to treat LLC as a sole prop
| 8 March 2009 | |
| H/W are equal members of an LLC - the articles of organization explicitly state the LLC will be treated as a disregarded entity. Both materially participate. For this purpose, does filing two Sch C's serve as an effective election to report as a sole proprietorship, or is there a separate form required to effectuate the election to not treat as a partnership? | |
| 8 March 2009 | |
| YEAH, not getting an LLC. The IRS' position is that the existence of a state created/sanctioned entity (the LLC) negates the QJV election (in non-CP states). Riley2 has pointed out that there is no basis in law for this, but you've got to decide which will cost more: the fee for doing the 1065, or the fee for representing them? | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| Community property state? | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| Generally, this would be a SMLLC then, unless this property is separate by law. | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| 8 March 2009 | |
| so one schedule C and check that business operated jointly? thanks for the help.
As for non-community property state, what about a situation like this - where the entity is created under state law and the election to treat as a disregarded entity is made at the time creation? That's appears irrelevant for my purposes, but I'm just curious. | |
Harry Boscoe (talk|edits) said: | 8 March 2009 |
| Curious, I went to the Schedule C instructions, and they said that the husband and wife, as part of making the "Qualified Joint Venture" election, should file *two* Schedule C's [or C-EZ's, or F's], reporting their respective shares of the income and expenses separately. Did I miss something in those instructions? | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| QJV election not made, as far as from what I've read. | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| I misread, you're right. Two Schedule C's | |
IDrinkYour Milkshake (talk|edits) said: | 8 March 2009 |
| Missed the "both materially participate" line. | |
| 9 March 2009 | |
| so back to my initial question, is there an actual form to make the QJV election? | |
IDrinkYour Milkshake (talk|edits) said: | 9 March 2009 |
| no | |
Harry Boscoe (talk|edits) said: | 9 March 2009 |
| "...is there an actual form...?"
No, the instructions pretty much say you elect it by doing it. According to IRS's website, however, an LLC - even though it's owned by husband and wife - is not eligible to make the QJV election. However, there's a Rev Proc from 2002 that seems to apply somehow in community property states to dilute that. Maybe, if memory serves, the Rev Proc was 2002-69. It's here on taxalmanac.com. I live elsewhere and don't consider myself competent to discuss community property issues. | |
| 9 March 2009 | |
| thanks Harry - and Milkshake.
Somewhat related - I recall that one of the Kiplinger letters last Spring had a note about the IRS making it easier for husband & wife LLCs to report on Schedule C for tax years beginning 2008. Does this mean anything to either of you? | |
| 9 March 2009 | |
| Harry, don't let a lack of competence get in your way of expressing your opinion. That's what the internet was invented for! | |
| 9 March 2009 | |
| A QJV election does not need to be made if the LLC interests are held solely as community property, in which case they should simply file 2 Schedule C's. | |
Harry Boscoe (talk|edits) said: | 9 March 2009 |
IDrinkYour Milkshake (talk|edits) said: | 9 March 2009 |
| Good, I'm keeping tabs Harry :) | |
