The process by which a husband and wife can set up a limited liability company (LLC) is the same as it would be for any two unrelated parties. Their status as a married couple does not affect the formation paperwork that needs to be filed with the state to launch the business. Their relationship only affects the ownership of the company and the options they have regarding the way the LLC is taxed. If the state in which the husband and wife reside is a community property state, meaning that all marital property is owned by both spouses equally, the husband-and-wife LLC will be considered jointly owned marital property, even if the spouses indicate unequal ownership percentages on paper. Further, the Internal Revenue Service gives a married couple the option of being treated as a single owner for business tax purposes.
Fit your business needs with the right LLC package
Check the availability of the name you want to use for the business. Every state has a limited liability company formation statute, and each statute requires a business operating in the state to choose a unique name that distinguishes it from other businesses. This enables the public to correctly identify companies. Go to the website of the business registrar or other state agency that handles new business start-ups. Typically, it is the Secretary of State's office. Search the state's business entity database to ensure that no other businesses operating in the state are using the name.
Select a registered agent. Every state requires businesses to designate a representative with a physical address within the state who can accept legal papers and official government correspondence on behalf of the company. The registered agent can be a person or a company authorized to do business in the state. If an individual, he can be a person associated with the new LLC or a third party. Some states require the registered agent to consent to the appointment in writing, while others merely want you to provide the agent’s name and address in your formation paperwork.
Draft articles of organization. All states require new LLCs to file a formation document with the state that indicates the new LLC's name, address, registered agent, duration of existence and the name and address of at least one owner, called a “member,” who is filing the paperwork. Some states will require you to identify all members, in which case you should list both the husband and the wife. Otherwise, listing one or the other is sufficient. This document is known as the articles or certificate of organization. Go to the state business registrar's website and download a fill-in-the-blanks template for this filing. Most states provide a form that organizes the basic information needed for an acceptable filing under state law to make it easier for people to start LLCs. You are not required to use this form. You or an attorney can draft your own articles of organization from scratch as long as you follow the provisions of the law.
File the articles of organization with the state and include the required filing fee. Most states will accept filings by mail, in person or by fax. Some states have an electronic filing option available. Your LLC comes into existence once the state accepts the articles for filing.
Draft an operating agreement. An operating agreement is a contract between members that indicates how the business will be run. Even though the members of this LLC are husband and wife, you should still put an operating agreement in place to address management issues and the procedure to shut down, buy out or divvy up the business in case one party wants to withdraw. The operating agreement is also where you record each member's percentage of ownership interest. You can decide that the husband and wife own the business equally and each have a 50 percent share, or that one spouse is the dominant member – for example, the wife could own 80 percent and the husband 20 percent. Keep in mind, however, if you live in a community property state, it will not matter how you divvy up the ownership percentage. If you divorce, the court will divide the business equally.
Obtain an Employer Identification Number (EIN) from the IRS. Browse to the IRS website and use the electronic application to apply for an EIN (link in Resources). Alternatively, download Form S-4 and mail, fax or telephone in the application. You can use the EIN application to indicate how you want your LLC to be taxed. The IRS allows a husband and wife who live in a community property state to choose to be treated as one member. Thus, you can elect to be taxed as a single-member LLC or a multi-member LLC. There is some evidence that the IRS will let all married LLC owners do this, even if they live in a separate property state. This gives you the option of having your LLC taxed as a sole proprietorship, partnership or corporation. You can also use IRS Form 8832 (Entity Classification Election) to make or change this selection.
- Registered agent
- Filing fees
References & Resources
- Creators.com: When LLC Members Are Married...To Each Other
- Internal Revenue Service: IRS Rev. Proc. 2002-69, 2002-2 CB 831 - IRC Sec(s). 7701, 10/09/2002
- Citizen Media Law Project: Limited Liability Company
- FindLaw: Forming an LLC
- FindLaw: Writing and Filing the Articles of Organization
- Citizen Media Law Project: Operating Agreement
- University of Pennsylvania Law School: Uniform Limited Liability Company Act (1996)
- Internal Revenue Service: Limited Liability Company (LLC)
- Internal Revenue Service: Forms for Limited Liability Companies (LLC)
- FindLaw: LLC Member Tax FAQs
- U.S. Small Business Administration: Limited Liability Company (LLC)
- Entrepreneur Media, Inc.: LLC Basics
- Internal Revenue Service: Apply for an Employer Identification Number (EIN) Online