Question:

Can a husband and wife operate a business as a sole proprietorship or do they need to be a partnership?

Answer:

A married couple who jointly own and operate a trade or business may choose for each spouse to be treated as a sole proprietor by electing to file as a "qualified joint venture." Requirements for a qualified joint venture:

• The only members in the joint venture are a husband and wife who file a joint tax return,
• The trade or business is owned and operated by the spouses as co-owners (and not in the name of a state law entity such as an LLC or LLP)
• The husband and wife must each materially participate in the trade or business
• Both spouses must elect qualified joint venture status on Form 1040 by dividing the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture and each spouse must file the appropriate forms.

Question:

Must a partnership or corporation file a tax form even though it had no income for the year?

Answer:

A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes. A domestic corporation must file an income tax form whether it has taxable income or not.

Question:

How do you determine if a person is an employee or an independent contractor?

Answer:

The determination is complex, but is based on whether the person for whom the services are performed has the right to control how the person performs the services. It is not based merely on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.
There are three basic categories of factors that are relevant to determining worker classifications:

• Behavioral control
• Financial control and
• Relationship of the parties

Question:

As an employer, do I have any liability if my employees receive tips but don't report them to me?

Answer:

Employers in industries where tipping is common know that they must pay the employer share of social security and Medicare taxes on tips which employees report to them. However, many employers do not realize that they may be liable for the employer share of these taxes on tips employees do not report to them. For tips which the employees did not report to the employer, the employer's liability does not arise until the Service issues a Section 3121(q) Notice and Demand.
You, as an employer, have a liability to withhold and pay the employee share of social security and Medicare tax on tips which your employees report to you to the extent that wages and other employee funds are available. You must also pay the employer share of social security and Medicare tax on all tips reported to you by employees.