Here's the question of the week...

A sole proprietorship is the default if your business type is not registered with the state. The sole proprietorship pays income taxes through the owner’s tax return and uses Schedule C (Profit or Loss for a Small Business).

If your business type is a partnership, it must consist of several partners and the partnership registered with the state. In this case, an information tax return on Form 1065 is filed. Individual partners receive a Schedule K-1 reflecting their share of the partnership’s losses and profits.

Small business owners' last type of business is a limited liability company (LLC). If the LLC comprises only one person, it’s a single-member LLC and pays income taxes as a sole proprietorship. If it’s composed of several members, it’s a multiple-member LLC taxed as a partnership.

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