Friday, May 15, 2009
There may be opportunity for your business. Check around.
Your book, website, and blog have been very helpful, but I have a question that I don't think you have covered.
My husband and I have owned a construction company in Virginia Beach, VA since 2008. We are registered as a partnership (federal, state, and local) with my husband as the primary or responsible party, but we have not filed any taxes as such yet. The majority of our business is currently in my husband's name, but in the future, we would like to become SWAM certified, which requires me to have the majority ownership.
My question is: now that we know we should not be a partnership and one of us should be an employee, how do we decide who it should be? We would like Jason to be the employee, but that would require changing everything.
Also, is going from owner to employee acceptable to the IRS?
Thank you for your help.
If there were no income to the partnership in 2008 you may be able to dissolve it. Have a partnership return filed with zero income and marked as final and have your husband file as a sole proprietor claiming all income.
There is no tax problem in switching business entities. If you manage the business and your husband does the manual labor that might make you the boss. However, you should check with a local tax pro who understands SWAM -- Small, Women- and Minority-owned Business requirements. You don't want to be disqualified because it may look as if the business really belongs to your husband but you are the minority and so that's why you're doing the switch.
Be sure to use someone who has SWAM experience.
I'm pleased my writing has been helpful.