Since 1971, Nolo's goal has been simple: Make America's legal system accessible to everyone. Our website, books, software, online legal forms and lawyer directory help millions of individuals, businesses and nonprofits solve their legal problems each year.
My husband and I own a small candy store together and don't want to create a formal business entity. Can we treat the business as a sole proprietorship even though we own it together and both work there?
Prior to 2007, only married taxpayers who lived in a community property state were allowed to treat their business as a sole proprietorship. Now, all married taxpayers have this option. To take advantage of this new rule, you and your spouse must be the only owners of the business (no kids or outsiders allowed), and both of you must materially participate in running the business.
If you meet these requirements and want to have your business treated as a sole proprietorship, you must file two separate IRS Schedule C's -- with each of you reporting your individual share of the business's income or loss. Going this route also means that you must each file a separate self-employment tax form (Schedule SE), reporting and paying Social Security and Medicare taxes on your separate share of the business income.
Nolo posts updates to the latest versions of books and software when major legal or practical changes occur. To see if your product has had a recent update, search for that book or software and visit its product page.
