My wife and I want to start our own business, but we can't decide if we should set it up as a partnership or a qualified joint venture. Is one method better than the other? Also, we'd like to pay our teenage twins to help us out. What's the best way to do this?
Filing as a qualified joint venture (QJV) is the easiest way to go if both you and your wife will materially participate in the business. You’ll include a Schedule C (Profit or Loss from Business) for each of you on your jointly filed tax return. Each spouse reports his or her share of the business income and expenses (50/50, 75/25, etc.). If your business is profitable (which is our hope), you’ll both pay self-employment taxes (Social Security and Medicare taxes.) Below are some of the advantages and disadvantages of filing as a QJV versus a partnership.
Employing your school-age children is a great idea and can save you money for a while.
Keep in mind that your children must perform bona fide work for your business and receive a reasonable wage. Maintain contemporaneous records of their work and compensation and be sure to issue them W-2s each year.
Here are some great articles if you’d like a little more information:
Or, if you prefer guidance directly from the IRS: