J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Forms of Business Organization Compared

So far, you have learned about the various forms of business organization. Which form is right for your business? The answer is really a judgment call based on all the factors previously discussed. You can, of course, use different forms of business organization for your different business activities. For example, you may have a C corporation and personally own the building in which it operates— directly or through an LLC. Or you may be in partnership for your professional activities, while running a sideline business as an S corporation.

Table 1.4 summarizes 2 important considerations: how the type of business organization is formed and what effect the form of business organization has on where income and deductions are reported.

TABLE 1.4 Comparison of Forms of Business Organization

Type of Business	How It Is Formed	Where Income and Deductions Are Reported
Sole proprietorship	No special requirements	On owner’s Schedule C or C-EZ (Schedule F for farming)
Partnership	No special requirements	Some items taken into account in figuring (but generally have trade or business income directly on partnership agreement) Form 1065 (allocable amount claimed on partner’s Schedule E); separately stated items passed through to partners and claimed in various places on partner’s tax return
Limited special partnership	Some items taken into account in figuring partnership under state law	Trade or business income directly on Form 1065 (allocable ...