What You Will Get From This Article:
- Steps to start a husband and wife LLC
- Common tax treatment for husband and wife LLCs
- Purpose of a Husband and Wife LLC Operating Agreement
- Sample excerpt from a Husband and Wife LLC Operating Agreement
This post contains affiliate links. Also note, I am not an attorney, this was put together based on experiences as a CPA and from research freely available on the internet. I make no representations that this template is 100% correct and will protect you 100%. Any business venture carries risk, if you are still concerned, please consult an attorney.
Sec. 3.4 contains the election to file on a Schedule C instead of Form 1065.
If you have further questions, please consult your attorney, we will not be held responsible for any losses incurred following the advice in this blog.
If you share a business with your husband or wife, you should have a written agreement to protect your interests. Part of the agreement is below. If this is what you’re looking for, you can order a Word document that you can modify to meet your specific business.
I understand you may be concerned ordering from a website. You can also order in book form using the affiliate link below. You will just have to manually create from the Operating Agreement in the book.
The benefits of a husband/wife LLC are that you can file as a disregarded entity. No need to file a separate partnership return. Typical steps to start a Husband & Wife LLC:
- File the articles of organization with your Secretary of State. Most can be done online. All States charge a small fee to incorporate.
- Apply for an EIN (Employer Identification Number.)
- Get a separate bank account for the LLC, you do not want to commingle assets.
- Create an operating agreement.
That’s it. This can all be done in a few hours for a small business.
As mentioned above, the best reason to create a Husband and Wife Limited Liability Company (LLC) is for the simplicity come tax time. While it may not be best for all organizations, the vast majority it is.
The IRS does not see the husband and wife as separate individuals, thus they can file one Schedule C on their personal tax return (Form 1040.) Most entities still get the benefit of the Qualified Business Deduction (QBI.)
You can review my article on taxes for sole proprietors to learn more on the QBI.
Purpose of the Husband and Wife LLC Operating Agreement
To form a contract between you and your spouse that specifies your management plan and the agreement you have should the business need to liquidate or one spouse needs to buy the other out in the future.
The agreement extra important in community property states as it contains the election to elect to be taxed as a disregarded entity and file on the husband and wife’s personal tax return, eliminating the need to file a Form 1065 return. You will need to file a joint tax return and comply with other requirements in your state. (This optional election is in section 3 of the form and is highlighted so you take note.)
Information on joint Husband and Wife LLC ownership regarding taxes is available at this IRS site.
You will need to decide the percentage of ownership you each have, whether 50/50 or something else. Absent an agreement or in community property states, it’s typically 50/50. Note that since you will need to file a joint return, there is no advantage of dividing the profits or losses any other way than even.
Six States (California, Delaware, Maine, Missouri, Nebraska and New York) require LLCs to have an operating agreement. If you reside any any of these States, make sure you have an Operating Agreement on file. The husband and wife LLC operating agreement template available below will suffice in your State.
OPERATING AGREEMENT
Date:
Parties:
The parties to this agreement (the “members”), who are husband and wife, are entering into this agreement for the purpose of forming a limited liability company (the “company”) under the Limited Liability Company Act of the state of [name of state of organization] (the “Act”).
AGREEMENTS:
SECTION 1. FORMATION
1.1 Name. The name of the company is [name of company].
1.2 Articles of Organization. Articles of organization for the company were filed with the secretary of state for the state of [State of organization] on [date].
1.3 Duration. The company will exist until dissolved as provided in this agreement.
1.4 Principal Office. The company’s principal office will initially be at [address of principal office], but the members may relocate it at any time.
1.5 Registered Office and Registered Agent. The company’s initial registered office will be at [address of registered office], and the name of its initial registered agent at that address will be [name of registered agent]. The company’s registered agent and registered office can only be changed by filing a notice of the change with the secretary of state for the state in which the articles of organization of the company were filed.
1.6 Purposes and Powers. The company is formed for the purpose of engaging in any lawful business that a limited liability company may engage in under the Act. The company has the power to do all things necessary, incident, or in furtherance of those businesses.
1.7 Title to Assets. Title to all assets of the company will be held in the name of the company. No member has any right to the assets of the company or any ownership interest in those assets except indirectly as a result of the member’s ownership of an interest in the company. No member has any right to partition any assets of the company or any right to receive any specific assets on the winding up of the business of the company or on any other distribution from the company. Assets of the company may not be commingled with those of a member or any other person.
SECTION 2. MEMBERS, CONTRIBUTIONS AND INTERESTS
2.1 Members. The names and addresses of the members of the company, the amounts of their initial capital contributions, and their initial ownership interests are:
Name and Address of Parties Contribution Amount Percentage Ownership
Each member’s ownership interest at any time will be determined by the ratio of that member’s aggregate capital contributions to the aggregate capital contributions of both members.
Get the entire form mailed to you in a Word document for $4.99.
The Husband and Wife LLC Operating Agreement is intended to be more brief than other operating agreements since it omits provisions that relate to unrelated members. The Word document is 8 pages, but could end up a couple pages less when executed if you remove optional provisions.
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If you need taxes prepared next year for your new venture or personally this year, click here. You can also email me (ValdostaCPA at Yahoo dot Com) for a specific quote. Most of the tax returns I do for small businesses range from $300-$900.
