Many small business owners ask their tax attorneys and business attorneys what type of tax return they need to have prepared and filed with the Internal Revenue Service. The article below has been drafted by a Denver small business attorney regarding common tax returns and forms filed by small businesses.
If you are a sole proprietor or single member limited liability company you will file a Schedule C with your 1040 Individual Income Tax Return to report your business income and expenses. The net income from your business will also be reported on Schedule SE to calculate the self employment tax. A single member limited liability company is considered a disregarded entity and thus unless the limited liability company makes the election to be taxed as an S Corporation it will file a Schedule C as if it were a sole proprietor.
If you are a partner in a multi-member limited liability company or a partnership you will file a 1065, which is a U.S. Return of Partnership Income. The 1065 will state all of the partnership’s income and expenses and thus the ordinary business income (or loss) of the partnership. The partnership’s income (or loss) and other items are passed through to the members or partners and reported on Form K-1, which is titled K-1 Partner’s Share of Income, Deductions and Credits etc. Thus, the K-1 is the form by which the income and other items is reported for each partner to the Internal Revenue Service.
If you are a shareholder in a corporation, and the corporation has made the election to be taxed as an S Corporation, the S Corporation will file an 1120S, which is a U.S. Income Tax Return for an S Corporation. The 1120S will state the S Corporation’s income and expenses and the S Corporation’s business income or loss. Like a partnership, an S Corporation is considered as pass through entity and the income, loss and other items are passed through to the shareholders on a Schedule K-1, titled Shareholders Share of Income, Deductions and Credits, etc.
If your business sold assets during the tax year, you will likely need to file Form 4797. Form 4797 is titled Sales of Business Property and as the title would dictate is used to report the sale of business property and gain from such sale(s) of property. Form 4797 also calculates depreciation recapture amounts and involuntary conversions.
The McGuire Law Firm can assist you with your tax questions & issues, tax returns & forms, tax planning, the drafting of business documents and overall legal advice regarding business operations.