Whether adding your spouse as an LLC owner is wise depends on marital stability, how well you get along, and how much you trust them. Don’t add a spouse if they’re unable to help or you have a rocky relationship, as removing them later is difficult.
Tax Implications and Legal Benefits
There are minor tax differences when adding a spouse. A legal benefit can be formation of a Qualified Joint Venture, not needing to file taxes as a partnership but instead as a single entity.
However, a spouse could already have liability depending on involvement in the company. Adding them shifts ownership, altering legal and financial aspects like tax status and lawsuit susceptibility. Limiting risk is a goal of an LLC to protect personal assets. But a spouse may already access assets, depending on involvement.
Employment vs. Ownership
Hiring a spouse provides potential fringe benefits and tax advantages. Thanks to the Tax Cuts and Jobs Act, an employee-spouse can shelter wages up to $12,000 from income tax. Whether they should have income depends on their work. More than half ownership or income is usually unnecessary.
You don’t have to add a spouse to LLC documents if uninvolved in the business. Sometimes inclusion is necessary or helpful. If the spouse actually works, they need to earn income, not just have ownership. Otherwise no payroll taxes, but also no retirement plan or Social Security contributions.
Conclusion
In summary, weigh matters like business goals, taxes, lawsuits, relationships and skills before adding a spouse. Consult an attorney to understand the full impact.