Running a business takes a lot of savvy and know-how, especially when the number of businesses you own goes up. Every business you add to your portfolio brings a whole slew of extra paperwork and forms. Are they all really necessary, or can some be combined with the forms from your other businesses? If you’re filing taxes for multiple businesses, then read on.
There are several different ways to legally structure your business when you start it, and each one has a different tax requirement. The two most common structures for small businesses are sole proprietorships and LLCs.
An LLC grants the owner limited liability for debts incurred while operating the business, while a sole proprietorship leaves the owner responsible for all debts — if the company lacks sufficient funds to pay its bills and taxes, then personal assets may be seized for payment.
If you own one or more LLCs, you would not file a separate return for your businesses. LLCs’ earnings go directly to the owners, who then pay the appropriate taxes at their designated tax rate.
If you own multiple Sole Proprietorships, things start to get a little murky. Every business that hires employees needs an Employer Identification Number (EIN) or a Federal Tax Identification Number. However, the IRS is sometimes reluctant to issue multiple EINs to the same person. So for the sake of convenience, you may need to assume a Doing Business As name, or a DBA. If your business are similar enough in nature, you may also be able to operate them under the same Sole Proprietorship.
How to File
When filing taxes for your businesses, you’ll most likely need to fill out a Schedule C, the most commonly used form for small business owners who are the sole owner of their business. Alternately, you may choose to file a Schedule C-EZ (a shortened version of this form) if your business is profitable, has less than $5,000 in expenses, and no inventory or employees. File either Schedule C or Schedule C-EZ as an attachment to your Form 1040.
If you are a partner in a business rather than a sole proprietor, you’ll need to document your income on a Form 1065 (Return of Partnership Income). If you’re filing for a corporation, you’ll need to fill out a Form 1120 (Corporation Income Tax Return), or a Form 1120-S if you’re filing for an S-Corporation.
When filing for multiple businesses, it’s best to file a separate form for each business. While you can combine your multiple businesses onto the same form, this is not the most transparent method, and could increase your chances of getting an audit.
Looking for help with filing taxes for multiple businesses? Hacker Accounting prides itself on its successful record working with countless small businesses. Give us a call at (602) 375-5251 to get started.