Which Tax Forms Do You Need To File For Your Business?

It is an exciting feeling when you start a new business, and if the business makes it through its first year, that is considered a major accomplishment. Along with the day to day management of the business, you will also have to wear several hats; one of these hats is a bookkeeper. This means that when tax season arrives, you need to be prepared, and that starts with knowing which tax form you will need. 

The following is a break down given to us by Ramon Ortega CPA on how you will file your company’s tax return based on the type of business you have. 

Sole Proprietor

This is the simplest business structure, and if you choose to operate your business as a sole proprietor, you will have it relatively easy when it is time to file taxes. 

The paperwork and the actual filing requirements are simple and straightforward. As the sole proprietor, you are your business. All of the income and expenses for the business can be list on a Schedule C form. You will file this form along with your 1040 Form for your personal income taxes. With this type of business structure, the business is not taxed separately. 

C Corporation

If you have decided to incorporate your business as a C corporation, you must file an 1120 Form when you file your business return. This type of form is slightly more complicated than the Schedule C. The 1120 Form asks more detailed questions, and it also requires you to fill out a balance sheet that includes information from the beginning of the tax period to the end of the tax period. 

Keep in mind that corporations must pay taxes on earnings, if applicable. Shareholders must also pay taxes on their dividends. This is also referred to as double taxation because the same monies are taxed twice. 

S Corporation

This corporation is structured similarly to the C corporation, but S corporations have limits on the number of shareholders allowed. 

Another difference is that S corporations can sell shares and pass this income directly to shareholders. This prevents the income from being taxed twice. For this type of business, you will need to file a 1065 Form. 

Partnership

This business structure also uses a 1065 Form. Partnerships do not pay tax. Instead, each partner has a net income, income tax credits, and other items passed to them from the business. The partners then receive a Schedule K-1, and they report their individual tax items on this form. 

Nonprofits

This type of business includes ministries, charities, educational organizations, etc. Nonprofits use a 990 Form to report income and expenses. They must also include a balance sheet. 

Owning a business is much more involved than selling a product or service. You must understand your business structure, gather the necessary information and then choose the proper tax forms when you are ready to file your company’s taxes.