Sole Proprietorships and spouses
Q. My spouse has a sole proprietor business and would like to hire me as an employee. How do I go about paying myself?
A. The IRS has a special category for this type of business where a “sole” proprietor can actually be two spouses in certain cases. This election is called a “Qualified Joint Venture”. Further in-depth discussion of this can be found on this page. Per the IRS website, “The spouses must share the businesses’ items of income, gain, loss, deduction, and credit.” By electing QJV status, spouses will apportion these items between themselves on a tax return.
Joint ventures cannot be partnerships or LLCs registered within a state. These elections change the way taxes are calculated on the entity.
Check with your tax adviser however. He/she may indicate that you should go ahead and be a true employee within the spouse’s company. You may also be advised to elect a different type of business entity. Without running the specific numbers in the case, there is simply no way to provide you a more definitive answer on this topic. This information has been presented as a starting point to your research and inquiries of your tax adviser.
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