What Tax Forms Do Business Owners Use?

The tax forms a business owner uses are directly tied to the company’s legal structure. How a business is organized—as a sole proprietorship, corporation, or partnership—determines which IRS forms are required to report income and expenses. Each primary business entity has a corresponding set of federal tax forms, and identifying the correct ones is a fundamental part of compliance.

Sole Proprietorships and Single-Member LLCs

A sole proprietorship is a straightforward business structure where a single individual owns and operates the business without creating a separate legal entity. The financial activities are reported directly on the owner’s personal tax return using Schedule C, “Profit or Loss from Business,” which is filed with Form 1040. If an owner operates more than one distinct business, a separate Schedule C must be completed for each one.

Schedule C requires a detailed accounting of the business’s financial performance. The form captures gross receipts and sales, then subtracts the cost of goods sold to arrive at gross profit. It also provides a list of deductible business expenses, such as advertising, office expenses, and supplies. The final calculation reveals the net profit or loss, which is carried over to the owner’s Form 1040.

The net profit on Schedule C is also used to determine liability for self-employment taxes, which cover Social Security and Medicare. These are calculated on Schedule SE, “Self-Employment Tax,” at a 15.3% rate, composed of 12.4% for Social Security on earnings up to an annual limit and 2.9% for Medicare with no limit. An owner can deduct one-half of their self-employment tax from their adjusted gross income on Form 1040.

A single-member Limited Liability Company (LLC) is, by default, treated as a “disregarded entity” for federal tax purposes. This means the IRS treats it identically to a sole proprietorship for income tax filing. The owner of a single-member LLC reports all business income and expenses on Schedule C and calculates self-employment taxes using Schedule SE.

Partnerships and Multi-Member LLCs

A partnership is a business with two or more individuals who jointly own and operate it. For federal tax purposes, partnerships are “pass-through” entities, meaning the business itself does not pay income tax. Instead, the financial results pass through to the partners, who report their shares on their personal tax returns. The partnership files an annual informational return, Form 1065, “U.S. Return of Partnership Income.”

Form 1065 details the partnership’s total income, deductions, and losses for the year. The deadline for filing Form 1065 is the 15th day of the third month after the end of the partnership’s tax year.

The link between the partnership’s return and the partners’ returns is Schedule K-1. The partnership prepares a separate Schedule K-1 for each partner, which breaks down that individual’s specific share of the partnership’s financial items, such as ordinary business income or deductions. The allocation of these items is determined by the partnership agreement.

Each partner uses the information from their Schedule K-1 to complete their own Form 1040. By default, a multi-member LLC is taxed as a partnership, requiring it to file Form 1065 and issue Schedule K-1s to its members.

S Corporations

An S corporation, or S corp, is a special tax election, not a distinct legal entity. A corporation or an LLC can choose to be taxed under Subchapter S by filing Form 2553. This election must generally be made no more than two months and 15 days after the beginning of the tax year. To qualify, a business must be a domestic corporation with no more than 100 shareholders, who must be U.S. citizens or residents.

Like partnerships, S corporations are pass-through entities. The corporation files an informational return, Form 1120-S, to report its income, deductions, and profits. The financial results are passed through to the shareholders via a Schedule K-1, and they report their share of the income and losses on their personal tax returns.

A defining characteristic of the S corp is the treatment of owner compensation. Any shareholder who provides significant services to the corporation is an employee and must be paid a “reasonable compensation” as a salary. This salary is subject to standard payroll taxes, including Social Security and Medicare (FICA) taxes.

Profits earned by the S corporation beyond this reasonable salary can be distributed to shareholders. These distributions are not subject to self-employment or payroll taxes, which can result in tax savings. The IRS scrutinizes whether the salary paid is reasonable to ensure that businesses are not improperly avoiding payroll taxes.

C Corporations

A C corporation is a legal entity entirely separate from its owners, known as shareholders. For tax purposes, a C corporation files Form 1120, “U.S. Corporation Income Tax Return,” and pays taxes directly at the corporate level. Unlike pass-through entities, a C corp calculates its own tax liability, which is subject to a flat 21% federal corporate income tax rate.

The filing deadline for Form 1120 is the 15th day of the fourth month following the end of the corporation’s tax year. All domestic corporations are required to file Form 1120, regardless of whether they have taxable income for the year.

A significant characteristic of the C corporation is “double taxation.” This occurs because the corporation’s profits are taxed once at the corporate level via Form 1120. Then, if the corporation distributes its after-tax profits to shareholders as dividends, those dividends are taxed again on the shareholders’ personal income tax returns, reported on Form 1099-DIV.

While double taxation can be a drawback, C corporations may retain earnings within the company for reinvestment, which can defer the second layer of tax. The structure also offers benefits like the ability to have an unlimited number of shareholders.

Other Common Federal Tax Forms

Employment Taxes

Businesses with employees have ongoing tax responsibilities. Form 941, “Employer’s QUARTERLY Federal Tax Return,” is used to report income taxes, Social Security, and Medicare taxes withheld from employee paychecks, as well as the employer’s portion of these taxes. This form must be filed each quarter, with deadlines on April 30, July 31, October 31, and January 31.

Employers must also address federal unemployment taxes. Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” is filed annually to report and pay FUTA tax. This tax is paid solely by the employer and is not withheld from employee wages. The FUTA tax applies to the first $7,000 of wages paid to each employee.

Payments to Non-Employees

When a business pays an independent contractor $600 or more for services during a calendar year, it must report these payments to the IRS. This is done using Form 1099-NEC, “Nonemployee Compensation.” The business must send a copy of the form to both the contractor and the IRS by January 31 of the following year.

Estimated Taxes

Individuals who receive income not subject to withholding, such as sole proprietors, partners, and S corporation shareholders, are often required to pay estimated taxes. These payments are made using Form 1040-ES, “Estimated Tax for Individuals,” to cover both income tax and self-employment tax. Payments are typically made in four quarterly installments to avoid an underpayment penalty.