types of business tax returns

Filing Business Tax Returns

Business tax returns can seem overwhelming and complicated. If you are a new business owner you may be wondering how you are going to file your taxes. The answer will depend on the type of business organization you use. In this article, we will go over the different business structures the tax returns that they file.

Sole Proprietorship

If you own a sole proprietorship you have flow-through taxation. This means that your business is not taxed separately. Instead, the income or loss flows through to your personal tax return. You report this on Schedule C of your 1040. However, if you make your money through rental income, you use Schedule E of your 1040 instead. This is due on the same date your personal tax return is due.

Partnership

If you run a partnership you will file your taxes on Form 1065. Even though you are filing a form separate from your personal return, the partnership itself does not pay taxes. Income and expenses are passed to the partners with a Schedule K-1. They use this document to report any income or loss on their personal return by using Schedule E, Part II of Form 1040. Your form 1065 is due at the same time as personal tax returns are.

Limited Liability Company

LLCs are very flexible with their taxation. You can file on Schedule C of your 1040 if you are a sole owner, or you can file a Form 1065 if there are multiple owners. You also have the option to file as an S-Corporation or a C-Corporation. There is more information on S-Corporations and C-Corporations below.

If you are unsure how you should file your business tax returns for your LLC, also in case of Texas LLC formation – meet with your tax adviser. They will be able to help you make the best choice for your situation.

S-Corporation

An S-Corporation allows income and losses to pass through to the shareholders. The shareholders will report this information on their personal returns. This avoids double taxation since the corporation is not taxed separately from the shareholders. However, the S-Corporation still must file a tax return. This is done on Form 1120s and it is due on March 15th.

C-Corporation

A C-Corporation files a Form 1120. The corporation will pay taxes on any income earned. Then earning or dividends are applied to the shareholders through 1099s. The shareholders then will pay taxes on those earning on their personal tax returns. This is double taxation, since taxes paid on two levels. The Form 1120 is due on March 15th.

Non-Profit Organization

Non-profit organizations include churches, charities, and many educational institutions. These file their taxes on Form 990. On this form, you much report income, expenses, a balance sheet, information on officers, and the organizations funding sources. Reporting requirements are strict so that they can keep their tax-exempt status.

Additional Information

Whatever type of business tax returns your file there are important things that every business owner must do. This includes careful record keeping. You will want to keep receipts, invoices, check stubs, etc. You need to keep any documentation that proves the income and expenses you claim. It is also important to find a tax preparer who has experience with business tax returns. They will help you better your tax situation and can give you advice on what to do for future tax returns.

Questions? Want to schedule an appointment? Contact us by clicking here.

Business Tax Preparation