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Article Date:
May 2012

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Legal Structure to Save Taxes for Husband-and-Wife Business (Part 1 of 2)

Many married couples who start a business simply divide the work and run the business together.


They don’t give much thought to how the IRS will characterize their venture for tax purposes. After all, unless they form a C corporation (which is unusual), all the business income ends up on their joint tax return anyway.


Don’t make the no-planning mistake. As a married couple running a business, you have options that can lead to significant Social Security tax savings.


The first option—and the one that will likely save you the most in taxes—is to run the business as a sole proprietorship and hire your spouse as your employee.


The Arrangement


If married and you are the only person who manages and controls the business, you can operate as a proprietorship. As such, you can hire any number of employees to work in the business, including your spouse and other family members.


When you hire your spouse in the proprietorship, you deduct as business expenses the salary ... Log in to view full article.

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