Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

My husband and I started a business and today we obtained an…

Hi, My husband and...

Hi, My husband and I started a business and today we obtained an EIN as an LLC Partnership. However, after a few hours we discovered the high franchise tax in California and no longer want to be an LLC. Should we cancel our current EIN and apply for a new one, or is there a way to change the business type to our already existing EIN? Also, if we do apply for a new EIN is a partnership the best option for a married couple that files a joint tax return? Would a sole proprietorship be more beneficial?Hope my questions make sense :/

Accountant's Assistant: The Expert will know how to help. Is there anything else the Expert should be aware of?

The only other think I can think of is that we did successfully file for a DBA

Show More
Show Less
Ask Your Own Tax Question
Answered in 45 minutes by:
9/17/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,669
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

HI, MY NAME’S LANE - I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986

...

IRS created the “qualified joint venture” (QJV) election in 2007. This allows the husband and wife to be treated as two sole proprietors of the same business (instead of as partners). To do this, you must file jointly.

According to the IRS, your business qualifies if the following is true:

...

  • You and your spouse are the only partners in the business;
  • Both partners participate in the business;
  • You file a joint return; AND
  • You both agree to the election to QJV.

...

As a QJV, both partners (individually) complete a separate Schedule C on which they list their share of all revenues and expenses. If the QJV is 50/50, for example, and the business had revenue of $100,000 and expenses of $60,000. Each partner would report income of $50,000 and expenses of $30,000 on their Schedule C and pay the corresponding taxes.

...

The partners each file a Schedule C along with the joint 1040 form.

...

State Entity” Exclusion

...

If your business is a state entity, most commonly an LLC, YOU, NORMALLY, MAY NOT FILE AS A QJV ...However ..., spouses doing business in a community-property state — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin — are exempt from this rule.

...

SO ... You're fine here - Just file two schedule C's for your LLC, and by doing so, you are electing the Qualified Joint Venture.

Ask Your Own Tax Question

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will compensate me for the work here.

Thanks,

Lane

Ask Your Own Tax Question
Customer reply replied 10 months ago
Hi Lane,Thank you for the information regarding the QJV. However, I was most concerned about the EIN. I'm ashamed to admit it but we were overly excited to start our business and applied for our EIN as an LLC partnership before actually filling an articles of organization with the California Secretary of State. After becoming aware that California Charges a $800 franchise tax each year we decided that we did not want to be an LLC. So, my question is should we cancel the LLC EIN that we have and apply for a new EIN, or can we correct our EIN to be a general partnership or QJV?

The EIN can still be used for the LLC that's treated as a Qualified joint venture (by filing two Schedule C's) rather than defaulting to partnership taxation for multi-member LLCs (and then filing a 1065)

...

Either way, as a partnership OR as an LLC you'd have the franchise tax.

...

What I'll need to research, as it relates to California, is whether California treats the QJV as a sole proprietorship (husband and wife sole proprietorship, another name for the QJV when the LLC entity simply isn't used).

...

THAT may be the way to escape the franchise tax. It would seem that you simply file the two schedule C's that profit that flows to ine 12 on the joint return becomes part of the AGI that is used as the starting point on the California Joint return.

...

In that scenario you leave the EIN you applied for as an LLC lie dormant. And IF you want a separate EIN for the sole proprietorship (although it wouldn't be needed for your taxes, you'd simply use your social security numbers) to, say, open a business account or have employees, (the only reason a sole proprietorship or single member LLC EVER needs an EIN), you can do that for the sole proprietorship.

...

Bear with me a for a bit.

Ask Your Own Tax Question

Yes, California conforms by reference to Subchapter K of the Internal Revenue Code in R&TC section 17851 as of the specified date of January 1, 2005, with specified modifications. In general, the classification of an eligible business entity for California purposes is required to be the same as the eligible business entity’s classification for federal purposes.

...

SO, if the objective is to escape the franchise tax, you elect QJV statue for your Husband and Wife sole proprietorship.

...

The price for this is that you are not afforded the corporate law protection that comes from having the separate state law entity in the form on an LLC (whether taxed as an LLC partnership OR LLC QJV).

Ask Your Own Tax Question

By the way, there is no requirement to USE an EIN. IRS does not retire EIN's, but if it's never used it simply is never used but simply could not be used by anyone else.

...

Let me know if you have questions.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,669
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 10 months ago
Thank you so much for your service and for all this helpful information. I have no further question. Excellent, 5 Stars!

Thanks so much,

Lane

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,669
14,669 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
IRS Tax Question: Client registers in the State of Texas as
IRS Tax Question: Client registers in the State of Texas as an LLC for a rental property that they co-own with their spouse. For IRS purposes, they don't apply for the EIN as an LLC, but as a Partners… read more
Barbara
Barbara
Enrolled Agent, Paralegal
5,450 satisfied customers
Second opinion] My husband and I started a business and
Second opinion] Hi, My husband and I started a business and today we obtained an EIN as an LLC Partnership. However, after a few hours we discovered the high franchise tax in California and no longer … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Several Tax Filing questions about a Multi Member LLC with 2
Several Tax Filing questions about a Multi Member LLC with 2 DBAs and Tax FilingPresently our Multi (2) Member LLC has 1 DBA (operates as Partnership), last year I used TurboTax to create a1065 and 2 … read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,669 satisfied customers
How do I go about changing my entity from a sole to a
How do I go about changing my entity from a sole to a partnership? I have a federal ID already as a sole. Do I have to file for another Federal ID number? Do I have to file a SS-4 to apply from sole t… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I applied number as a single member LLC in Jan. 06. 2016
I applied for EIN number as a single member LLC in Jan. 06. 2016 (company formation date) for employee filing and received EIN number letter, which says both company name (XXX LLC) And my name (XXX so… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
We obtained FED EIN in 2015 with multimember LLC and
We obtained FED EIN in 2015 with multimember LLC and registered as multimember LLC with AZ State as well. After this in DEC 2015, we amended our AZ articles to just a single member LLC. Our question i… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
The company was closed in PA in 2013 and filed final tax tax
The company was closed in PA in 2013 and filed final tax tax return. The owner likes to reuse the previous EIN number and company name for new company. Actually, the PA registration status is still ac… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,669 satisfied customers
When converting from a Delaware LLC to a Delaware C Corp, are
When converting from a Delaware LLC to a Delaware C Corp, are you required to get a new EIN?… read more
fastfile
fastfile
Tax Advisor
Master's Degree
550 satisfied customers
We are husband & wife who founded our business as a general
We are husband & wife who founded our business as a general partnership. We elected to file as a married couple sole proprietorship/joint venture later on with the IRS and now file separate schedule C… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can a person have DBA without FEIN number? IRS agent keep
Can a person have DBA without FEIN number? IRS agent keep pushing that unless you have a FEIN number and/or business license you do not have business. Can you point me to IRS rules & regulations where… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Client formed a partnership with one other partner, and made
Client formed a partnership with one other partner, and made the business an LLC in 2013. The partnership did nothing in 2013, no income, minimum expenses to set up LLC. Partner #2 dropped out. Does t… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
I am obtaining ownership of my husbands sole proprietorship.
I am obtaining ownership of my husband's sole proprietorship. Is it correct that he has to abandon his DBA before I can apply for a new DBA? If so, does he need to abandon the DBA before I apply? The … read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,669 satisfied customers
We recently formed a single-member LLC (Texas) that is a disregarded
We recently formed a single-member LLC (Texas) that is a disregarded entity-sole proprietorship. Former sole proprietorship had its own EIN for payroll purposes. I am trying to find out if we can use … read more
abci168
abci168
Principal
27 satisfied customers
In California you have a sole proprietorship business and you
In California you have a sole proprietorship business and you change to become a 2 member LLC, do I have to dissolve my FEIN and apply for a new one under the LLC? If so, how do I cancel or dissolve t… read more
socrateaser
socrateaser
1,031 satisfied customers
Hello, and thank you in advance for taking the time to answer
Hello, and thank you in advance for taking the time to answer my rather complicated question... I am currently a Nevada resident, and have a single member LLC in the State of Nevada that is split into… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am starting an online business in retail and re-sell. I have
I am starting an online business in retail and re-sell. I have an EIN tax number from when I tried to start an online business in another state, but never got off the ground. Am I able to use the same… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I have a LLC from 2006 that I have not used or operated since
I have a LLC from 2006 that I have not used or operated since 2006. I have been operating as a Sole properitor since 2009 in Arkansas with a DBA in a completely un related business from the LLC. I wan… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
We are sole proprietors of a business, in Jan 2007, we ...
We are sole proprietors of a business, in Jan 2007, we filed to become an LLC and when that process was completed, we filed to a New Fed Tax ID#. How do we terminate our old Fed Tax ID#. Also, since m… read more
Ed Johnson
Ed Johnson
Senior HR Consultant and Business Devlpm
Bachelor's Degree
6,994 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x