It’s time to talk taxes. Now that you are official, Uncle Sam will be looking for his cut. New businesses are required to pay and report income taxes to the Internal Revenue Service. The income tax rate and forms depend on the type of business company structure. Read about income taxes for the different types of business structures below:
Sole Proprietorship Income Taxes and Forms
Sole proprietors file business income tax with personal income tax returns. There are several forms that sole proprietors use to calculate and file tax, including:
- 1040 Individual Tax Return
- Schedule C – Profit or Loss from Business
Partnership Income Taxes and Forms
Partnerships must file an annual information return detailing their income, deductions, gains, and losses, but no income tax is remitted with this form. Because the partnership's income and loss 'passes through' to the partners, each partner is required to report their share of business income or loss on their personal tax return. The return that partnerships use for income, gains, losses, deductions, and credits is: Form 1065 Return of Partnership Income.
LLC Income Taxes and Forms
LLCs do not have a specific income tax designation. Instead, they are taxed like either a sole proprietorship, partnership, or corporation.
If the LLC only has one member, the IRS will treat the LLC as a sole proprietorship, and if the LLC has multiple members, the IRS will treat the LLC as a general partnership. If members of the LLC prefer to file and be taxed as C Corp or S Corp, Form 8832 can be filed with the IRS.
The business income tax return will follow the specified designation based on the business structure or tax election.
C Corp Income Taxes and Forms
Corporations are required to file a corporate tax return reporting the company's taxable income, which is the company's profit in the year. C Corps file their corporate tax return using the Form 1120 Corporation Income Tax Return.
S Corp Income Taxes and Forms
Unlike C Corps, S Corps does not file corporate tax returns. Instead, S Corps owners report business profit or loss and report it on their personal tax returns. The reason for this is due to the S Corps pass-through taxation. In addition to the owners reporting business profit or loss on their personal tax returns, S Corps use the following form to report income taxes Form 1120S Income Tax Return for an S Corporation.
Way to go! You and your business can start moving forward. Ready to grow your team and make your first hire? We've got you covered with our Hiring Guide.