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For tax purposes what's the best business structure to start with my husband?

Tobyhanna, PA |

My husband and I are about to start a business together and would like to know how to go about it. If I understand what I've read, if we are partners we would both be taxed separately even though we are married, is that true? If so would it be better to have a sole proprietor, an LLC, a general partnership etc...? Thank you

Attorney Answers 4

  1. You should have the advice of both a business attorney and a business accountant who are familiar with your particular business and financial situation. With that said, if you and your husband are going into business together you cannot be a sole proprietorship - it would have to be a partnership, LLC or corporation. In PA there are tax differences between a corporation and an LLC. There are serious liability differences between a general partnership and either a corporation or LLC. You should not start the business without getting tax and legal advice on the best structure for your business.

    I am happy to discuss this with you if you would like to contact me next week at 215-525-1165 x101.

    This response does not create an attorney-client relationship and is not intended to provide legal advice for your specific situation.

  2. There is simply no one size that fits all. The knee jerk reaction is the LLC, but to have it fully respected by the IRS, there are some things you have to do as a married couple. A married couple LLC can be treated as a sole prop or a true LLC depending on the initial return submitted. It would be good to run it by a CPA in your area.

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  3. Much will depend on the nature of your business, where you intend to conduct business (just in PA or outside of PA) and your current financial situation and objectives (does one spouse have liabilities that require attention vs. those of another). My law firm is based in PA and has numerous people that can assist, as can other well-qualified people here on AVVO.

    The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.

  4. The IRS does not require married couples to report their income separately just because they are partners in a business. You can still file a joint tax return for your personal income flowing from a partnership, Limited Liability Partnership, Limited Liability Company, Corporation filing as a Sub Chapter S, or other flow through tax entity.

    Some of the other things you should think about are will you fund the entity with your personal property, his personal property or marital property? Will the contributions from personal property be equivalent or different? Will you commingle all of your assets or earnings in the future or will you attempt to account for them separately?

    Will each of you contribute your time equally to the business? Will the value of the time contributions made to the business be equal? Does one member bring more value to the business? Is their an advantage to be gained as a female owned business or will the business already qualify as minority business?

    A good business attorney will not only help you answer the questions you have; but, also ask questions that you have never considered. I don't think that you need an attorney to hire an attorney to answer the question you asked. But, I think that hiring one to advise you on your startup will be money well invested.

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