My sister and I stared a business together last year can we both file our taxes as self-employed for that business? Or do we need to do a 1065 form?

In fact, by starting the business together, you and your sister have formed an informal partnership.

It would be much easier for the partnership to report its income and expenses as a partnership on form 1065 then allocate to each of you your share of the profit/loss through the Schedules K-1, rather than each of you reporting half of income and of every expense on a Schedule C.

If fact, you MUST file as a 1065 partnership, because the only time you can file a partnership as 2-schedule C businesses is if the only two partners are spouses, in that case it is a "qualified joint venture".  You can't have a qualified joint venture with your sibling.