If both husband and wife jointly own an unincorporated business and share in the profits and losses, each spouse is a partner in a partnership even if the couple does not have a formal partnership agreement.

To circumvent this, both spouses must elect Schedule C treatment to become a qualified joint venture, which is conducted by the husband and wife who file a joint return.  Qualified joint venture is not treated as a partnership for tax purposes. A qualified joint venture is a trade or business in which the only members are a husband and wife and both spouses materially participate. However, the election cannot be made if the business has a partnership or LLC agreement in effect.

To make the election, each spouse must file a separate Schedule C to report profits and losses attributable to his or her interest in the business.

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