What schedules, financial statements, and TurboTax product does my small business need?

This chart summarizes some key info about various business structures:

• Taxable or pass through status of the structure
• Tax return form number
• Whether the structure provides business principals with liability protection
• The applicable TurboTax business products 

*A pass-through entity doesn't pay income tax. Instead, for income tax the income flows to each owner, usually in proportion to their ownership share. They report that income individually. The pass-through entity is still required to file an entity-level tax return and an individual income schedule (K-1) for each owner.

Financial statements are accounting reports using transaction information from the business; the general ledger is a repository of all of the financial transactions. There are three major financial statements:

• Balance sheet: how financially healthy is the business?
• Income statement: how profitable is the business?
• Cash flow statement: can the business generate enough cash to cover expenses?

Transaction activity is tracked from sources (like invoices, bank deposit slips, canceled checks, and so on) and recorded in the books of account (such as journals and ledgers) of the business. Physical books and records have largely been replaced by digital apps such as online bank accounts, various reports and communications, and bookkeeping software solutions such as QuickBooks. 

Yes, you need financial statements if you:

• Want to know how your business is performing (for understanding and reviewing financial statements, see How to Read Financial Statements).
• Need to raise credit from a lender or vendor.
• Are going to comply with state and federal laws on income tax and other taxes. In the most basic of cases, your financial statement could be the income and expense reporting section of your income tax return.

Sole Proprietorships: Form 1040 Schedule C is the IRS version of the income statement. A sole proprietorship files Schedule C Profit or Loss from Business, along with their Form 1040 income tax return.  For more information, see What is Schedule C, and who needs to file one?

S corporations: Form 1120S Schedule L Balance Sheet must be completed if total receipts for the year were over $250,000, and total assets at year end were over $250,000. Best practices suggest that it be filled out for all businesses to make it easier in future years when it becomes required and also to provide a more accurate return.

Partnerships or multi-member LLCs: Form 1065 Schedule L Balance Sheet must be completed unless the entity meets all of these conditions: Best practices suggest that it be filed for all businesses to make it easier in the year that it is required. 

• Total receipts for the tax year were less than $250,000.
• Total assets at the end of the tax year were less than $1 million.
• Schedules K-1 were filed with the return and given to the partners by the due date (including extensions).
• The partnership isn't filing, and isn't required to file Schedule M-3.

See these resources:

• Ultimate guide to small business tax forms, schedules, and resources
• What is a 1099?
• How to fill out a W-2 form