Working together to solve a problem or accomplish a task is a great way to strengthen a bond or relationship between two people. For this reason, many husbands and wives choose to go into business with their spouse. This can take many forms and functions, including a general partnership between both spouses, sharing equal responsibility and roles, or one spouse is employed by the other. The Small Business and Work Opportunity Tax Act of 2007 changed the way that married couples that worked together could file their taxes.
If you work with your spouse, in any capacity, you may need the aid of an experienced business attorney to help you navigate the appropriate business structure to choose for your business. Please contact Iowa business formation lawyers at LaMarca Law Group, P.C., by calling (515) 705-0233 for more information on how your business can benefit from helpful legal counsel.
The Tax Benefits Businesses Owned and Operated by a Married Couple
If a husband and wife are the only members of a joint venture, and they both materially contribute to the business and they agree to file in this way, they may have their general partnership file taxes as two individual sole proprietorships. This change in policy is a result of the 2007 Small Business and Work Opportunity Tax Act.
This policy allows husbands and wives to file as sole proprietors in place of partners so that each partner is accruing Social Security and Medicare tax credits for themselves as individuals instead of having a joint filing for the income which would result in decreased Social Security and Medicare credit for the couple. This policy maximizes the taxable income in order to increase Social Security and Medicare tax credits for both individuals in the relationship.
Under this policy, taxes are accounted to each of the partners in the business as a sole proprietorship based on the percentage of gain attributed to the work of each partner. Though taxes should not significantly increase because of this distinction, the amount of Social Security and Medicare credit does increase, because both partners are filing as individual proprietors instead of a single shared income.
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For more information on how proper business formation can position you for success, please contact Iowa business formation lawyers at LaMarca Law Group, P.C., by calling (515) 705-0233.