What Tax Forms to File as a First-Time Business Owner
Congratulations on starting your new business. As a new business owner, taxes are probably the last thing on your mind. But since there’s no getting around them, here is some basic information about the forms you’ll need to file as a new business owner. In general, the form you must use to file your business taxes is determined by the type of business you have organized. There are many business structures available today. But for purposes of this article I will stick to the most popular: sole proprietor, partnership, corporation, and limited liability company.
Check with your state and local authorities to see the requirements to form a business, as well as what type of license, permit, etc. you need to operate there. Each entity type should apply to get a Employer Identification Number (EIN) from the IRS using Form SS-4. You should also check with your state about getting a state tax ID.
In most cases, new businesses operate as a sole proprietorship. When tax time rolls around, if you are organized as a sole proprietor, you will need to complete Schedule C* of the Form 1040 to account for your business profit or loss. Note that if you have $5,000 or less in expenses you may be able to file the Schedule C-EZ instead. The profit or loss from the Schedule C is then transferred to page 1 of the Form 1040, where it is included with your taxable income.
*If your small business income is from rents or royalties, you will use Schedule E. If it’s farming income, you will use Schedule F.
It’s important to keep accurate records of your business income and expenses, as you will be required to report these things on the Schedule C. For more information on starting a business and filing with a Schedule C, see Publication 334, Tax Guide for Small Business. This includes information on EINs, record-keeping, tax year, accounting method, and more.
Partnership, S Corporation, and C Corporation
If you are organized as a Partnership, you file the strictly informational Form 1065. A Schedule K-1 is produced for each partner and then you use that K-1 to determine the income that is reported on your personal Form 1040.
If you are organized as a C Corporation or S Corporation, you should file a Form 1120 or Form 1120S, respectively.
Limited Liability Company (LLC)
Some business owners choose to organize under the popular LLC structure. LLCs have a lot of flexibility when it comes to filing taxes. They can be taxed like a sole proprietor (if they have only one member), partnership, or even like a corporation (C or S). If you are the only member of your LLC, then you will be automatically treated like a sole proprietor. Most multiple member LLCs will be treated like a partnership. If you decide you would like to be taxed in a different manner than these defaults, then you need to file Form 8832 to elect another classification. Note that if you intend to be classified as an S Corporation, you need to complete Form 2553. Once you determine your business structure for tax purposes, just use the recommended forms above to file. To understand more, be sure to check out these instructions from the IRS: IRS Forms for LLCs.
When These Forms are Due
Form 1065 and Form 1040 Schedule C must be filed by April, 15th. Forms 1120, 1120A, and 1120S are due a month earlier, by the March 15th deadline.