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I know it's possible to run a business from home. What I mean is rather to create a business whose sole purpose is to maintain a family & associated household, that would have expenses such as feeding the company members, maintaining the place of work (the house or apartment where the employees reside), cleaning and maintenance and transportation costs of the associated members, etc.

The company's primary source of income would be purchase of equity by or investments from it's owners (the wife and I) that is derived from salary or wages at other companies. The goal is to be able to deduct some of the business expenses, and also to be able to transfer some assets to the company to lower our personal tax liability.

The reason I believe this should be possible somehow is that people make small businesses and shell corporations as legal tax shelters frequently with more tenuous company plans. This business would obviously be a sunk cost company, and would lose a lot of money. An alternative source of income would be to classify the company as also being a contracting company, but then wages would be paid directly to the company as a subcontractor, and wouldn't include benefits like 401K match or Health Care.

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    You might as well name the company "IRS Please Audit Me, Inc." This scheme ain't gonna work. – JohnFx Jul 10 at 0:18
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Nope, because it is NOT A BUSINESS because it lacks the INTENT to be a business.

The problem is this:

The company's primary source of income would be purchase of equity by or investments from it's owners

Have fun arguing that those are investments (they are not) and not income for the business. Have fun arguing the business does not have minimum wage requirements for its employees.

Basically, to make it work:

  • You have to invoice the household members for work done
  • You have to demonstrate that you can make a profit doing so at least theoretically
  • You then end up paying all the overhead compared to just doing the work.

The concept of not having income makes it a non-business.

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  • Let's add that there would be a fringe benefit to the household members of "fair market value" for the housing, food, and so on that the business provides to them. Ignoring any potential headaches with minors and so on, you'd end up creating an implicit income stream back to the household members of "value received" which would then itself be subject to taxes. You're proposing an incredibly convoluted scheme that ends up being worse than zero-sum. – Istanari Jul 10 at 18:03
  • Your answer very clearly points out what the legal flaw in this idea is. I couldn't find this clearly documented anywhere. Thank you! – Christ Schlacta Jul 10 at 21:35

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