Though my circumstances are not that difficult, I want to be sure that I pursue the correct legal path for my family since our business administrative needs may be changing.
I am a self employed contracted Software Engineer. I do not have an LLC because my tax write offs are minimal and I work directly with one client with whom I have a good relationship. I've had no benefit for opening an LLC so I've not done the work or paid the fees to do so.
My wife may soon start an at-home business, bringing in a modest income. I handle 100% of our finances and we've always filed jointly. What I'm hoping to do is to strike a balance between financial management (including tax handling and preparation) between both our work and income. What should we do to most easily manage our money, without overpaying to much in taxes within the US?
Here are the options that I can think of:
- We both work as self-employed entities. Her expenses will be separate from mine and at tax time, we file jointly. She will have more expenses and write-offs than I will so business bookkeeping will be double what it currently is because I will have to find a way to manage her business separately.
- She becomes an LLC but I don't. Similar to the first option but since she will be working with many clients, this could offer some liability sheltering. That may not be necessary but it never hurts to have a safety net.
- We create an LLC or some other legal "blanket" entity that we both work for as employees. All income and expenses come from the same entity/accounting management software, taxes are handled as a single entity and income payments are dispersed back to us. If this is feasible, we'll probably want to keep it easy where either she or I receive a sole pay check rather than one each. My wife hasn't had personal income in over 7 years. It would be nice not to have to file taxes for someone if you don't need too.
- Anything else that's a better idea.
What's the best way to set up an at-home business that will have two workers, assuming it's feasible for the two of us to financially "group" our work together, even though the nature of our work isn't directly the same? There are many households where both spouses are self employed. What's the best approach of managing our business/businesses as a single unit so that we can simplify tax burdens and paperwork?