If you're thinking of starting a business venture, you'll want to understand how your business income would be taxed. As a self-employed person, you'd be responsible for paying both income taxes and self-employment taxes on your earnings.
Income taxes. Many self-employed individuals operate as sole proprietors. A sole proprietor doesn't file a separate federal income-tax return for the business. Instead, the income and expenses of the business are summarized on a form (called Schedule C) that is included with the proprietor's personal income-tax return.
For liability reasons, you may decide to form a limited liability company (LLC) instead of operating your business as a sole proprietor. Assuming you don't have co-owners, you generally would report the LLC income and expenses on Schedule C, just as you would with a sole proprietorship.
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