Part 2 Business Entities, Classification and Elections question: husband own and run a catering business together

Part 2Business Entities, Classification and Elections

Ana and her husband own and run a catering business together, are its only owners, did not form a state law entity, and file jointly. They want to avoid filing Form 1065. What can they do?

A Elect qualified joint venture status and each file a Schedule C
B Report the income on Schedule E as rental income split between them
C Nothing; any business with two owners must file Form 1065
D File one Schedule C in the husband's name only

Show the answer and explanation

Answer: A. Elect qualified joint venture status and each file a Schedule C

Spouses who are the only members of an unincorporated business they both materially participate in, and who file jointly, may elect to be a qualified joint venture. Each then reports his or her share of income and expenses on a separate Schedule C and Schedule SE, so each earns Social Security credit. A state law entity such as an LLC cannot use this election. Source: IRC 761(f); Pub. 334 (2025), Qualified Joint Venture. Tax year: 2025 (law as of 31 Dec 2025).