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I AM a NEW business owners: Which tax return do I file?

Starting a new business is an exciting venture that comes with a myriad of responsibilities, not the least of which is understanding your tax obligations. The type of tax return you need to file is determined by the legal structure of your business. In this article, we'll explore the various forms you may need to file based on your business status. Let's dive in!

Tax Returns Based on Status

When it comes to taxation, the structure of your business plays a pivotal role in determining the type of tax return you need to file. The Internal Revenue Service (IRS) has different forms for different types of business entities. Here's a rundown of the tax forms you might need:

Form 1040 - Schedule C

If you're operating a sole proprietorship or a single-member Limited Liability Company (LLC), you'll need to file Form 1040, Schedule C. A sole proprietorship is a one-person business that isn't registered with the state as a limited liability company or corporation. A single-member LLC is a business entity registered with the state that has one owner, who is required to report business income and expenses on Schedule C of their personal tax return.

Form 1065

If your business is set up as a partnership or a multi-member LLC and you haven't elected to be taxed differently, you will need to file Form 1065. A partnership is a business owned by two or more people who share its profits and losses. A multi-member LLC is a limited liability company with more than one owner. These entities report income and expenses on Form 1065, and each partner or member receives a Schedule K-1 showing their share of the business income and deductions.

Form 1120

Businesses that are structured as corporations or those that have elected to be taxed as corporations file Form 1120. Corporations are separate legal entities owned by shareholders, and they are required to report income and expenses, and pay taxes at the corporate level. If your business falls under this category, you'll need to file Form 1120, the U.S. Corporation Income Tax Return.

Form 1120S

If you have elected for your business to be taxed as an S-Corporation, you will need to file Form 1120S. An S-Corporation is a corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S-corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

Understanding your tax obligations as a business owner can be a complex process, but it's essential for the financial health of your business. If you're unsure about which tax return form to file, consider seeking advice from a tax professional.


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