Since 2007, the IRS has given husbands and wives, filing a joint tax return, the opportunity to treat their business venture like a jointly owned sole proprietorship. This election is only available to “qualified joint ventures” exclusive to husband and wife only members provided that both parties materially participate in the trade or business and of course, file a joint tax return. (See IRS.gov Small Business/Self-Employed)
This has several advantages over treating the business as a partnership, the first of which is the reduction in paperwork and record keeping.
Operating in this manner allows the principals to first and foremost attend to the business and its needs rather than worrying about keeping records that are more detailed for a partnership. A 1040 return is simple and besides that, each spouse has to fill out separate Schedule C returns according to their pre-determined ownership stakes.
This avoids the hassle of having both spouses fill out partnership returns and keeps everything organized and clean.
Self-employment taxes can often drag a husband and wife business down, but a big advantage is that both spouses can get credit for paying social security and Medicare taxes without paying more in taxes.
If one spouse has an outside job, that spouse can get credit for taxes withheld and therefore, the burden of all the payroll tax isn't shouldered by the other spouse. This husband and wife-business election can be beneficial as long as both spouses do actually participate in the operation of the business.
When you start a business with your spouse, you do not need to incorporate it or form an LLC. You will be able to deduct all your expenses on a Schedule C and do not have to worry about the cost of incorporating (LLC) or the extra paperwork of filing for an Employer Identification Number (EIN). Your social security numbers will do just fine and there is no need to go out of your way to register with the Federal Government any further.
In most cases, registering with your state will be required especially if you need a re-sale number and want to sell products that will be subject to sales tax.