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What Tax Forms Do Sole Proprietors Need?

One of the first decisions that a person must make when starting a business is the type of legal structure he or she wants to establish. This decision will be based on a variety of factors, including the nature of the business, the number of owners, the amount of liability protection the owner desires, and tax obligations. As with most things in life, each type of business structure comes with various advantages and disadvantages.

The tax treatment of a particular business structure is generally one of the deciding factors when people are trying to choose a legal structure. For example, corporations -- C corporations, to be exact -- are subject to double taxation, meaning the profits are taxed at the corporate level and dividends are also taxed once the shareholders receive them. A sole proprietorship, on the other hand, enjoys pass-through taxation, meaning that the profits are taxed on the owner's personal tax return.

This article provides you with the forms that most sole proprietors will need to pay their federal taxes.

What Is a Sole Proprietorship?

A sole proprietorship is a type of business that is owned by one individual (if there is more than one owner, a person can form a general partnership). A sole proprietor is not required to register with the state nor are there any formal requirements to create or maintain a sole proprietorship, which makes it the easiest and least expensive type of business structure. Another benefit of a sole proprietorship is that the owner is not required to file separate taxes for the business. More specifically, a sole proprietor simply includes the income and expenses of the business on his or her personal tax return. It's important to mention that while this is the simplest type of business structure, it does have drawbacks with the biggest one being that the sole proprietor is not shielded from personal liability for business debts or legal judgments against the business.

Tax Forms for Sole Proprietors

The following chart provides information to help you determine some of the forms that you may be required to file if you are a sole proprietor.

Taxes you may be liable for:

Use Form:

Income Tax

1040 and Schedule C or C-EZ (Schedule F for farm businesses)

Self-Employment Tax

1040 and Schedule SE

Estimated Tax


Employment Taxes

  • Social security and Medicare taxes and income tax withholding
  • Federal unemployment (FUTA) tax
  • Depositing employment taxes


Excise Taxes

Refer to the Excise Tax webpage on the IRS website.

Please remember that this chart is only meant to be a guide, and only refers to possible federal taxes that sole proprietors may be responsible for. You will most likely also have state, city, and/or county tax obligations as well.

Getting Legal Help

If you would like to find out if being a sole proprietor is right for you, or would like more information about other types of business structures, you should contact an experienced business organizations attorney in your area.

You can visit FindLaw's section on Incorporation and Legal Structures for more information and resources related to sole proprietorships as well as other business structures.

Next Steps
Contact a qualified business organizations attorney to help you
choose the best formation for your business.
(e.g., Chicago, IL or 60611)

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