Married Couple, Jointly owned LLC. Can we file on schedule C?

Question

My wife and I own an LLC. The first couple years in business we paid a CPA to file our taxes. He filed as a partnership on a 1065 and issued K1 forms to each of us. Then the K1 forms get added to other income on our personal 1040.

I'm planning to do our taxes myself this year. From what I'm reading, an LLC can file as a "disregarded entity" and simply report revenue and expenses on schedule C as part of our personal return - but that only applies to single member LLC's, not partnerships.

I'm trying to figure out if I can use this method (schedule C) for our business since its jointly owned by a married couple. There are no other owners or partners and we intend to file a joint return for our personal 1040 so all the income will end up on that same joint return anyway. Some sources say yes, some say we can but must file 2 schedule C forms (one for each of us), and other sources say this isn't allowed at all and we have to keep doing 1065/k1 returns.

So 3 questions:
1. Can we file on schedule C?

2. If so, do we need separate schedule C forms or can I just put all the income in one spouse's name since the end result is the same anyway?

3. If we can file on schedule C, do we need to provide any notice to the IRS of our intent to change from 1065 to a disregarded entity, other than just filing the 1040 with schedule C form(s)?

Thank you,

tro · Answer

if you have previously filed this as an LLP(limited partnership) you should continue that until you dissolve it
if you want to file Sch C's(two of them) then dissolve the LLC and file in your 1040
disregarded means that IRS does not recognize it other than a corporation,  a partnership or a sole proprietor, an LLC or LLP are state designations

Casey Y · Answer

Read what your accountant used to do, copy their work, just changing the numbers to be current.  Otherwise, hire another accountant...

I hire an accountant every 3 years...handling my taxes alone in the intervening years.

Anonymous · Answer

Only if you live in a community property state *and* you did not incorporate.

If you live anywhere else, it's  1065, schedule k-1, then 1040.  If you incorporated,  1120 or 1120s.

Your updates are telling.

1.  Your accountant already set up the 1065--*that* is your disregarded entity.  You can only change that to a qualified joint venture IF you are in a community property state.  If you do not live in a CPS, your accountant did the only valid option, but you are too cheap to use him again...

2.  If you both did work in the business, do NOT combine the totals and report under one name.  It's wrong and it accumulates social security earnings under the wrong person.

3.  Again, WHICH state are you in?

A Business Owned and Operated by the Spouses through a Limited Liability Company Does Not Qualify for the Election

Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity [such as an LLC]) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to married couple state law entities in community property states.

https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorporated-businesses

Anonymous · Answer

The majority of kids on here are worried about how to kiss, how to die, or does my lipstick look ok.
Know what I mean son?

Married Couple, Jointly owned LLC. Can we file on schedule C?

4 Answers