1. Tax Considerations by Business Type: Sole Proprietorship
2. Tax Considerations by Business Type: General Partnership
3. Tax Considerations by Business Type: Limited Liability Company (LLC)
4. Tax Considerations by Business Type: C Corporation
5. Tax Considerations by Business Type: S Corporation

There are different types of business tax returns available to accommodate the different sizes and needs of businesses.

Tax Considerations by Business Type: Sole Proprietorship

In a sole proprietorship, both the owner and the business are the same. In regards to taxes, the government does not see the business in a sole proprietorship as a separate taxable entity. Any business liabilities or assets are included in the owner's personal liabilities and assets. A sole proprietor would file either of the following tax forms:

  • Schedule C
  • Schedule C-EZ, Form 1040 (individual income tax return)

Individuals can have multiple businesses under a sole proprietorship. In this case, they would just list each business and its activity on a new Schedule C form. A Schedule F would be used if the sole proprietorship is in the farming industry.

Sole proprietorships are generally simple to file. It includes any employees that are considered to be self-employed or an independent contractor. The paid tax rate is the same as the business owner's personal tax rate.

Tax Considerations by Business Type: General Partnership

A business partnership is also not considered to be a taxable entity. In a general partnership, each partner claims their own liabilities and assets and includes it with their personal tax return. All income that comes through the business is listed and then included on the individual tax return. A general partnership will utilize the following tax documents:

  • Form 1065 (return of partnership income)
  • Form 1040 (individual income tax return)

In a general partnership, each partner can expect to receive a Schedule K-1, which shares each partner's income. You will use this form when filling out your own income documents. Each partner can expect to pay taxes on their portion of the income received.

Tax Considerations by Business Type: Limited Liability Company (LLC)

The government considers a limited liability company (LLC) a separate entity. An LLC offers liability protection to limited liability company owners. In regards to tax expectations, LLC's limited liability company owners. In regards to tax expectations, LLC's are similar to a partnership. Liabilities and assets are reported on the personal income statement and taxes are paid at the individual level. LLC owners will use the following tax return documents:

  • Form 1065 (return of partnership income)
  • Form 1040 (individual income tax return)
  • Schedule C (a Schedule C is only used if one person owns 100 percent of the LLC business)

LLC businesses can also decide if they want to be considered a C corporation or an S corporation. This can affect the required tax filing documents. Limited liability companies are not a taxable entity and are instead, taxed on the individual tax return. If an LLC has more than one member, they will treat the filing process similar to filing as a partnership.

Tax Considerations by Business Type: C Corporation

A C corporation is a separate legal entity that is taxable. The C corporation is sometimes referred to as the regular corporation and is taxed at the corporate level. In some cases, they may also be double taxed due to dividend and salary payments. A C corporation would file the following documents:

  • Form 1120 (corporation income tax return)
  • Form 1040 (individual income tax return)

It is important to note, however, that the Form 1120 is not filed with the personal tax return. The two tax owing's could have separate tax rates.

Tax Considerations by Business Type: S Corporation

An S corporation is also classified as a separate tax entity. An S corporation has special permission from the IRS for treatment as a partnership. They are not liable for corporate taxes and are instead taxed on a pass-through basis. The biggest advantage of this tax setup is that S corporations are not double taxed. An S corporation will file the following documents:

  • Form 1120S (income tax return for S corporation)
  • Form 1040 (individual income tax return)
  • Schedule K-1 (individual owner shares)

S corporations do not usually have as many partners, or shareholders, as C corporations do. Each of the S corporation owners reports their liabilities and assets on their personal income statements.

It is important to understand the different types of business tax returns and what documents are required of each. If you need help with different types of business tax returns, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.