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What type of entity is my business?

SOLVEDby TurboTax18Updated February 14, 2024

The type of tax return that your business is required to file will depend on the legal structure of your business entity. Different business structures have different tax implications and reporting requirements. Here's a breakdown of the common business entity types and the corresponding tax returns they typically need to file:

Partnership (1065)

A partnership is a business with two or more individuals or entities that are owners. Each person contributes money, property, labor or skill, and shares in the profits and losses of the business. An LLC with more than one owner is usually treated as a partnership.

S-Corp (1120-S)

Income and deductions from an S corporation “pass-through” to each shareholder to be reported on their personal income tax returns. An S-corp must operate as a domestic corporation, have only one class of stock, and have no more than 100 U.S. shareholders. You must file Form 2553 to elect S-corp treatment by the IRS. An LLC can make this election.

Sole Proprietorship (1040 Sch. C)

Are owned by one person—you don't have any partners. If you are a sole proprietor, your business income and expenses should be reported on Schedule C of your personal return (Form 1040). If you run the business as an LLC and you are the sole owner, the IRS also considers you to be a sole proprietor that also uses Schedule C.

Is the business an LLC?

If you operate a business using a single or multi-member limited liability company (LLC), then you have more flexibility in choosing how the IRS taxes your business earnings. Your choice will directly influence the tax filing rules you are subject to. There's no set of tax rules that specifically apply to LLCs. The IRS allows an LLC to use partnership, corporate (C-corp or S-corp) or sole proprietor tax rules.

How would I be able to confirm my business entity?

If this is your first year filing taxes for your business, here are a few ways to identify how your business is set up:

  • Did you file a Form 2553 with the IRS to turn a C-corp or LLC into an S-corp? If so, your business is set up as an S-corp. 
  • Do you have a partnership agreement or operating agreement? If so, your business is set up as a Partnership.
  • If you run the business as an LLC and you're the sole owner, you have a Sole Proprietorship.
  • What did you select when you created your EIN? This will also tell you how the business is set up.

If this isn't the first time filing and the business setup hasn't changed, use last year's tax return:

  • Form 1040 with Schedule C is Sole Proprietorship.
  • Form 1120-S is S-corp.
  • Form 1065 is Partnership.

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