More and more couples are starting to do business together. There are some considerations to working together, though, and they’re not just who’s going to drive the car to work that day.
In terms of taxes, there are a few considerations to be aware of.
- You should first establish if you have a partnership business (where both spouses have an equal say in the affairs, services, and capital of the business) or an employee-employer relationship (where one spouse substantially controls management decisions). These relationships face different tax situations.
- If there is an employee-employer relationship, the “employee” spouse may be subject to income tax, Social Security, and Medicare.
- If there is a partnership relationship, your business income may need to be reported on Form 1065, U.S. Return of Partnership Income.
*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[8]
[8] IRS.gov, May 27, 2020
