There is no one-size-fits-all answer. The decision depends on your wife’s involvement, liability risks, and tax implications. Ultimately, weigh these factors to make the best decision.
Filing and Liability Considerations
A husband and wife LLC has to file a partnership return if married and filing jointly. The choice comes down to whether you can file as a single-member LLC, whether it would benefit you and your spouse, and whether you are willing to add them as a co-owner. Add her as a member and have a lawyer draft an LLC operating agreement favoring her position. Given this business provides income for your family, sit with a lawyer to discuss strategies allowing your family to continue profits if contingencies happen.
For example, if you use their car for a business trip, it could open up liability and tax questions if they’re not a member of the LLC.
Evaluating Trust and Relationship Dynamics
Whether adding your spouse as an LLC owner is a good idea or not depends on how much you trust your spouse, how well you get along, and your marital stability.
If your LLC is a partnership, adding your spouse as a partner may make sense from a tax perspective, as it can allow you to file a joint tax return and potentially save on taxes. However, it is important to consider the implications of adding a spouse as a partner from a liability perspective, as your spouse will be jointly and severally liable for the debts and obligations of the LLC.
The straightforward answer is no: You are not required to name your spouse anywhere in the LLC documents, especially if they aren’t directly involved in the business. However, there are some occasions where it may be helpful or necessary to include your spouse.
Single Member LLC Clarification
When forming a Limited Liability Company (LLC) for your business, one of the first questions you may ask yourself is whether you will form the LLC by yourself or with a spouse or maybe a business partner. Setting up an LLC creates a legal entity to hold your business assets in order to protect your personal assets from lawsuits filed against your business. Trust Is #1 Priority.
IRS Rules for Husband-Wife LLCs
When it comes to husband-wife LLCs, the IRS has rules. If LLC is owned by both, it’s a partnership. If one spouse solely owns the LLC, it’s a single member LLC.
In community property states, husband-wife LLCs can be single member LLCs. "Taxpayers’ treatment of entity owned by married couple as community property under laws, where no other person considered owner and not treated as corporation, as either disregarded entity or partnership, will be respected." So husband-wife LLC can file taxes as sole proprietorship.