Business structure can affect your income taxes

Business Structures and Taxes

• As a sole proprietor, it is not necessary to prepare a separate tax return for your business. The business income can be included on your tax return with the appropriate schedules and forms.

• Partnership, partners should be liable for the income tax according to their individual capacity outlined in the partnership agreement. Partners can report individual taxable income and losses on the appropriate schedules and forms.

• The corporation is a legally taxable entity. Shareholders are required to report any dividends on their tax returns. The corporation should file a separate return

• A C-corporation is similar to a corporation it is a tax-paying entity. Shareholders will need to complete the necessary schedules with their Form 1040.

• S-Corporation is a pass-through company for tax purposes. Shareholders are still required to report profits and losses on Schedule E on their personal income tax return.