Owners of small businesses are responsible for filling out their own tax forms and declaring their revenue accurately. However, many entrepreneurs struggle to fill in their tax forms and find the whole process overwhelming and stressful.
There are many tax forms to choose from which is why it can be a difficult and tedious process for many. This article will present some of the compatible tax forms that entrepreneurs can fill out if they own a small business.
A short overview of each compatible tax form will be provided further in the article.
Readers should bear in mind that tax forms can change from country to country. Therefore, it is important to check if these forms apply to your country.
Everything listed and referenced in this article will be relevant for American citizens who are required to pay taxes in the United States.
How to pick the right tax forms
Choosing the right tax form depends mostly on the size and structure of an owner’s business. There are different tax forms to fill out for each type of business.
Therefore, business owners need to make sure they know exactly which category their company falls under.
Three of the most common business structures include:
- S-Corporations
- LLCs
- C-Corporation entities
S-corporations are generally exempt from paying income taxes in the United States. However, this does not mean that they do not pay taxes.
The shareholders are responsible for including the company’s losses, income and more on their individual income tax returns. This type of business has its advantages and disadvantages just as with any other business structure.
The next section will detail which tax forms owners of s-corporations can fill out.
LLCs are Limited Liability Companies. The most important advantage of this type of structure is the protection it offers to its owners and shareholders.
The owners of an LLC are protected from personal responsibility in case the company is held liable or goes bankrupt.
As for a C-Corporation, it applies to any company that chooses to tax its owners separately from the corporation.
So what tax forms are required for each type of business?
The different types of tax forms that small businesses commonly use
According to the Internal Revenue Service (IRS), there are five common types of business taxes. Here they are, listed in alphabetical order:
- Employment taxes
- Estimated taxes
- Excise tax
- Income tax
- Self-employment tax
The following paragraphs will explore some of these categories.
What are income taxes and who is required to pay them?
As mentioned above, some types of businesses require owners to file an individual tax form. Entrepreneurs in charge of one of the following types of businesses we usually be required to fill out an individual income tax form:
- Sole proprietorship
- Partnership
- LLC (as a sole owner or partner)
These companies transfer some of their income and losses to the owner which is why some entrepreneurs are required to fill out an individual tax form.
The individual tax form that these owners will need to fill out is usually one of the following:
- Form 1040/Individual Income Tax Return
OR
- Form 1040-SR/U.S. Tax Return for Seniors
Tax forms for those who own a partnership
Those who own a partnership will have to fill out the tax forms listed above AND an information return which is usually one or more of the following forms:
- Form 1065
- U.S. Return of Partnership Income
- Form 965-A
- Individual Report of Net 965 Tax Liability
There might be additional forms to fill out depending on the type of partnership that an owner has and the number of partners they have.
Tax forms for those who own a C-corporation, S-corp and LLC
On top of filing their income tax forms, owners of a C-Corporation will have to file Form 1120.
Those in charge of a S-corp or LLC will file a Form 1120-S.
Again, there might be additional forms to fill out depending on one’s exact situation, number of partners and type of business.
Final thoughts
This article provided an overview as to which types of tax forms small business owners usually have to fill out. Owners can make the process easier by selecting compatible tax forms.
