Tax Filing Requirements
How your business is structured determines which taxes you must pay and how you pay them. Here’s a quick look at what to expect for each business structure:
- Sole Proprietorship. You declare your income and expenses on Schedule C of Form 1040. It’s a good idea to consult with your tax professional to make sure you are taking every deduction available to you.
- Partnership. A partnership pays no income tax directly. Profits are passed through to the partners on Schedule K-1 of Form 1040 and each partner pays their share of taxes on their individual income tax return.
- C Corporation. This is a separate and self-contained legal entity. The C Corp declares income and expenses on Form 1120 and must pay estimated taxes, if profitable.
- S Corporation. Similar to a partnership, the S Corp pays no federal income tax. Your share of profits flows through to your individual income tax return on Schedule K-1. The corporation must withhold employment taxes and pay the employer’s share of Social Security and Medicare taxes for all employees.
- Limited Liability Company (LLC). There is no separate federal tax return for an LLC. For tax purposes, you have to decide to be treated as either an S Corp, C Corp, Partnership, or Sole Proprietor, and file and pay taxes accordingly as that entity.