Qualified Joint Venture

created the qualified joint venture to make tax paperwork easier for spouses who jointly own an unincorporated business.1 Under this provision, a husband and wife can elect to have the business treated as a qualified joint venture for tax purposes if they:2



are the sole owners of an unincorporated business, and



they each materially participate in the business (see Material Participation),


Effect of election. The main effect of being a qualified joint venture is that the business doesn't have to file as a Partnership. Instead, each spouse files as if he or she were a Sole Proprietorship, i.e., as two separate Schedule C businesses. Also, each spouse pays Self-employment Tax on his or her share of the income, deductions, credits, gains, and losses of the business.3


How to elect. Make the election by filing a joint Form 1040, with a separate Schedule C for each spouse. Report each spouse's share of income, deductions, etc. on his or her Schedule C.4


Good idea or bad idea? If you're sure you want your husband-and-wife business to be treated as a Partnership for federal tax purposes, electing to be a qualified joint venture is an OK idea. But you should consider other tax planning options, such as having one spouse be the sole owner and the other the sole employee.


For articles in our Tax Reduction Letter on tax strategies for husband-and-wife businesses, click on Husband and wife business in our Browse by Topic finding tool.



1           Staff of the Joint Committee on Taxation, “General Explanation of Tax Legislation Enacted in the 110th Congress,” JCS-1-09 (March 2009), page 14. Lawmakers also wanted to insure that each co-owner/spouse would receive “credit” for Social Security purposes. Id.

2           IRC Section 761(f).

3           IRC Section 1402(a)(17).

4           “2010 Instructions for Schedule C, Profit or Loss from Business,” page C-2.