Do me and my husband qualify for a "qualified joint venture".
My husband ans I are starting a business and have come to the point where we are unsure if we would be classified as a “qualified joint venture”.
Would you happen to know if we would or not?
Hi Danielle. Great question!
According to the IRS website, you must meet several criteria to be considered a “qualified joint venture.”
Here are the criteria from the IRS website:
“A qualified joint venture is a joint venture that conducts a trade or business where (1) the only members of the joint venture are a married couple who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership. A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company). Note also that mere joint ownership of property that is not a trade or business does not qualify for the election. The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse’s interest in the business. The meaning of ‘material participation’ is the same as under the passive activity loss rules in section 469(h) and the corresponding regulations (see Publication 925, Passive Activity and At-Risk Rules). Note that, except as provided in section 469(c)(7), rental real estate income or loss generally is passive under section 469, even if the material participation rules are satisfied, and filing as a qualified joint venture will not alter the character of passive income or loss.”
Your business with your husband may qualify as a “qualified joint venture” if you meet these criteria. However, it may also depend on the nature of your business. If your business collects passive revenue by renting real estate, for instance, you may not qualify.
You can read more directly at the IRS website: https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorporated-businesses
Hope this helps,