An LLC Schedule C should be used by a single-member LLC when filing business taxes as a sole proprietor. Sole proprietors must also use a Schedule C when filing taxes. If you run your own business, you'll generally need to complete an IRS Schedule C to account for your profits and losses. 

You should fill out a Schedule C form, which is entitled “Profit and Loss from Business (Sole Proprietorship)," and submit it alongside your income tax return. Typically, business owners who complete a Schedule C must also complete a Schedule SE or Self-Employment Tax form.

What Is a Sole Proprietorship?

  • Sole proprietors should also use Schedule C forms to account for the income and expenditure of their business.
  • A sole proprietorship refers to a business that is not established and run in a corporate business structure.
  • Regardless, when you run your business as a single-member LLC, it is necessary to fill in a Schedule C. 
  • A sole proprietorship does not need to have staff or business premises, but it can also operate in that way. 
  • A sole proprietorship means that you are in full control of the business, there is no senior staff in control of pay or taxes. 
  • Sole proprietorships refer to any business operated by an individual. For example, if you clean your neighbors' windows for $20 every month, you are operating a sole proprietorship.

Accessing Information for Completing Schedule C

Prior to filling in Schedule C, it necessary to compile a selection of business documents. You will need to gather the following items:

  • A profit and loss statement, which is also referred to as an income statement, reflecting the entire year in question.
  • A completed balance sheet for the year ending December 31 of the year in question. 
  • Financial statements that detail any assets bought during that year. 
  • In the case of a business that sells goods, you'll need to show particulars on the business inventory to calculate a cost of commodities sold.
  • Information on travel-related costs, car and truck expenses, and costs related to meals, socializing and home businesses. 

Schedule C Reporting

There are five sections in a Schedule C form. In the first part, you must detail all of your business revenue and work out your gross profit. In the second part of the form, deduct your business costs and determine your net profit or loss. This is the amount that you need to detail on your income tax return. 

Filling out Parts III to V is only required if buying stock is a necessity of your business. Alternatively, you will also need to complete these parts if you want to claim car costs or any other costs not detailed in Part II. 

How to Complete and File a Schedule C

  • Typically, you need to fill out the part of the form that details the cost of products sold. 
  • You'll also need to work out the gross income.
  • Next, you need to detail the permitted debits. 
  • These debits are deducted from gross income, resulting in the net income figure. 
  • The details of your net business income, listed in line 31 of Schedule C, is added to your personal tax return (Line 12: Business Income or Loss). 
  • This income is added to every other source of income to calculate the entire amount of gross income tax liability. 
  • If you own more than one business, you'll need to complete a Schedule C for each one. 

Schedule C-EZ

A large percentage of sole proprietors can use a more straightforward form, known as Schedule C-EZ. Schedule C-EZ does not ask for most of the information that's required in the full Schedule C. Instead, it simply requires the total sum of business income and expenses. But if you are claiming deductions for a car/truck, you'll need to fill out an additional section. 

It is only possible to use Schedule C-EZ if you run a single sole proprietorship, do not claim for over $5,000 in business costs, are detailing a net profit, and do not keep stock throughout the year. Additional requirements are that you have no staff and are not claiming expenses for a home office. 

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