{"id":4805,"date":"2016-04-04T10:47:45","date_gmt":"2016-04-04T15:47:45","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/incorporation-and-legal-structures\/business-forms-and-federal-tax-law.html"},"modified":"2024-05-22T22:15:56","modified_gmt":"2024-05-23T03:15:56","slug":"business-forms-and-federal-tax-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/incorporation-and-legal-structures\/business-forms-and-federal-tax-law.html","title":{"rendered":"Business Forms and Federal Tax Law"},"content":{"rendered":"\n
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Business Forms and Federal Tax Law<\/h1>\n
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\n By Jade Yeban, Esq.<\/a> | Legally reviewed by Aviana Cooper, Esq.<\/a>\n | Last updated\n
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Editorial Note: We earn a commission from affiliate partner links on FindLaw. Commissions do not affect the editorial integrity of our legal content.<\/p>\n\n <\/div>\n \n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Navigating federal tax law is crucial for small business owners. Understanding different business forms and their tax implications helps in making informed decisions. From sole proprietorships to nonprofit corporations, each business structure has unique tax obligations. This includes business tax, self-employment tax, and corporate income tax. This article simplifies these concepts, aiding small business owners in effectively managing their tax payments, tax returns, and tax liability.<\/p>\r\n

This overview provides some basic information on business forms<\/a> and federal taxation<\/a>. It’s important to understand that each type of business structure carries different tax implications and options. For example, a limited liability company<\/a> may choose to be treated as a corporation for tax purposes. It provides advantages in terms of deductions that a partnership tax status does not. Meanwhile, the owner’s personal income taxes include federal taxes for a sole proprietorship. But sole proprietorships have their own limits.<\/p>\r\n

This list should help you understand the basics and prepare you for a meeting with your attorney, who is equipped to help you decide what business form is best suited to your personal tax situation.<\/p>\r\n

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Sole Proprietorship<\/a><\/h2>\r\n

A sole proprietorship is a business owned by a single individual. It’s the simplest form of business, often chosen by new business startups. For tax purposes, the owner reports business income and business expenses on Schedule C<\/a> to the Internal Revenue Service (IRS). This is part of their individual income tax return. This structure subjects owners to self-employment tax<\/a>, covering Social Security and Medicare taxes. While sole proprietors enjoy full control, they also bear unlimited liability for business debts.<\/p>\r\n

Here are the key features of sole proprietorships:<\/p>\r\n