How to File Taxes for a Small Business: A Complete Guide

I had a client in Katy last year, restaurant owner doing $800K in revenue, who filed the same form as a freelance photographer in Sugar Land pulling in $120K. Turns out they structured differently, so their tax lives had nothing in common. Then I worked with a two-person consulting LLC in the Heights that was completely different from a single-member LLC doing identical work. And don’t get me started on the S-Corp owner in Pearland who had more filing headaches than a sole proprietor earning twice what they did.

Your business structure decides everything about how you file. Get that connection right, and the rest falls into place.

Your Structure Picks Your Form

The IRS doesn’t have one “business tax return” form. Your structure determines the form you file, when you file it, and whether you pay tax at the business level or personal level.

Here’s what I see most often for tax year 2025 (returns filed in 2026):

Entity Type	Primary Form	Filing Deadline	Extension Deadline
Sole Proprietorship	Schedule C (with Form 1040)	April 15, 2026	October 15, 2026
Single-Member LLC	Schedule C (with Form 1040)	April 15, 2026	October 15, 2026
Partnership / Multi-Member LLC	Form 1065 + Schedule K-1	March 16, 2026	September 15, 2026
S-Corporation	Form 1120-S + Schedule K-1	March 16, 2026	September 15, 2026
C-Corporation	Form 1120	April 15, 2026	October 15, 2026

Source: IRS filing deadlines by entity type

Here’s the thing that gets people: partnerships and S-Corps file March 16, not April 15. That’s a full month earlier. Miss it and you’re looking at $260 per partner or shareholder per month, up to 12 months, per the IRS instructions for Form 1065. I had a four-partner firm in Cypress come to me in July, three months late on their filing. Before we even looked at whether they’d paid the right amount of tax, they already owed $3,120 in penalties. They learned that lesson the hard way.

Sole Proprietors and Single-Member LLCs

The IRS calls a single-member LLC a “disregarded entity.” Meaning it ignores it. You file exactly like a sole proprietor.

What you file:

• Schedule C for your business income and expenses
• Schedule SE to calculate your Social Security and Medicare taxes
• Both go on your personal Form 1040

Self-employment tax hits everything: All your net profit gets hit with self-employment tax at 15.3% on the first $176,100 (2025), then 2.9% above that, per the IRS self-employment tax page.

Real math: I had a graphic designer in Katy clear $95,000 in profit last year. Self-employment tax alone was $13,430. Then add federal income tax on top of that.

What you can deduct:

• Home office (simplified method or actual expenses)
• Vehicle mileage or actual car expenses
• Your own health insurance premiums
• Retirement contributions (SEP-IRA, Solo 401(k))
• Office supplies, software, training

You might also qualify for the Qualified Business Income (QBI) deduction, which can knock 20% off your business income before tax. But there’s income limits and industry rules, so check first.

Partnerships and Multi-Member LLCs

Multi-member LLCs automatically get taxed like partnerships unless you elect otherwise. Partnerships themselves don’t pay federal income tax. The business files a return, then passes the income to you personally.

What you file:

• Form 1065 shows the business’s total income and expenses
• Schedule K-1 is your personal share of profits, losses, deductions, and credits
• You report that K-1 on your personal Form 1040

Important: Your K-1 income is subject to self-employment tax if you’re actively working in the business. If you’re a limited partner, you only owe self-employment tax on guaranteed payments.

How you split: Partners don’t have to split profits 50-50. Your partnership agreement says who gets what. But those allocations need “substantial economic effect” under IRS Section 704(b). You can’t just move money around for tax reasons.

S-Corporations

S-Corp isn’t a business structure. It’s a tax election. You file Form 2553 and you’ve elected S-Corp taxation. LLCs can do it. Corporations can do it. You stay the same legally; you just change how you’re taxed.

What you file:

• Form 1120-S for business income and expenses
• Schedule K-1 for each owner’s personal share
• You report your K-1 on your personal Form 1040

The payroll rule: If you work in your S-Corp, you pay yourself a real salary. You run payroll. You pay 7.65% employment taxes and the business pays 7.65%. Anything you pull out above that salary doesn’t get hit with self-employment tax.

That’s where you save money. See S-Corp vs LLC: Which Is Better for Taxes? for the full breakdown.

You also have to:

• File quarterly payroll returns (Form 941)
• Issue W-2s to yourself and any employees
• Handle state unemployment taxes
• Send Form 1099-NEC to contractors you paid $600 or more

C-Corporations

C-Corps are different. The business itself pays tax. Federal rate is a flat 21% on profits.

What happens:

• Form 1120 shows the business’s total income and tax
• The corporation pays 21% on what it makes
• If you take out dividends, you pay tax again on those dividends personally

That’s “double taxation,” which is why most small businesses skip C-Corps. But if you’re reinvesting all the profit back into growth or bringing in outside investors, C-Corps make sense.

QSBS can be huge: Under Section 1202 of the Internal Revenue Code, if you sell a qualifying C-Corp after holding it five years or more, you can exclude $10 million in capital gains from tax. For a business that’s going to exit, this changes everything. I walked through how to sell your C-Corporation for $10M tax-free if you want the real details.

Texas Has Its Own Rules

Good news: Texas has no state income tax. You don’t pay the state a dime on your business income.

Bad news: Texas has a franchise tax (they call it margin tax). If you’re under $2.65 million in annual revenue for 2026, you owe zero tax, though you might still file the Public/Ownership Information Report with the Texas Comptroller. Above that, it’s 0.75% for most businesses (0.375% if you’re a retailer or wholesaler).

May 15 deadline hits different: The franchise tax report is due May 15. Most Houston business owners are wrapped up in federal deadline stress in March and April, and they miss this one. But the state doesn’t care about your excuses.

Quarterly Estimated Payments

Your annual return isn’t the whole picture. The IRS wants money throughout the year. If you expect to owe $1,000 or more, you need quarterly estimated payments.

2026 due dates:

Quarter	Due Date
Q1 (Jan-Mar)	April 15, 2026
Q2 (Apr-May)	June 15, 2026
Q3 (Jun-Aug)	September 15, 2026
Q4 (Sep-Dec)	January 15, 2027

Miss them and you’re paying penalties. The IRS charges interest at the federal short-term rate plus 3%, and they adjust it quarterly. For 2025, we’re looking at about 7-8%. That’s real money on top of what you already owe.

Mistakes That Cost You Money

From ten years of seeing Houston businesses file, here’s what keeps coming up:

1. Wrong form, wrong deadline. Partnerships and S-Corps file March 16. Most people think April 15. Missing it costs $260 per partner or shareholder per month late.

2. Calling employees contractors. Saves payroll tax this year, but the IRS reclassifies them and suddenly you owe back taxes, penalties, and interest. Not worth it.

3. Mixing personal and business. Putting business income in your personal account, paying personal stuff from business accounts. The IRS Audit Technique Guides say this is their top audit trigger. Also makes it impossible to track what you actually deducted.

4. Skipping quarterly payments. First-year owners get surprised by underpayment penalties. If you’ll owe more than $1,000, you need quarterly payments.

5. Missing 1099s. Pay a contractor $600 or more, you file Form 1099-NEC by January 31. Fail to file and you’re looking at $60 to $310 per form late, per IRS rules.

What You Need to Gather

No matter what structure you have, you’ll need the same documents:

• Profit and loss statement for the whole year
• Balance sheet (required if you’re a partnership, S-Corp, or C-Corp)
• Bank and credit card statements matched against your books
• Receipts and proof for everything you deducted
• Last year’s return for carryovers and comparison
• Payroll records with W-2s and quarterly filings
• 1099s you received and copies of 1099s you issued
• Mileage log if you’re claiming car deductions
• Home office measurements if you’re taking that deduction

If you keep your books clean all year, this is just organizing what you already have. If you don’t, it’s a nightmare.

When You Should Hire Someone

A simple sole proprietor with a few thousand in expenses can do a Schedule C in TurboTax and be fine. Plenty of people do it.

It gets different fast. Multi-member LLCs with split allocations, S-Corps where you have to nail down “reasonable salary,” anything with employees, multiple states, depreciation, or losses carrying forward. You miss one detail and you’re overpaying or getting an IRS notice.

I tell most Houston owners: the tax prep fee pays for itself in deductions you’d miss, penalties you avoid, and time you get back. You know the prep cost. You don’t know the cost of being wrong.

At EZQ Group, we do returns for sole proprietors, partnerships, S-Corps, and C-Corps all over Houston. The foundation is clean books, which is why we do year-round bookkeeping alongside tax prep. Nothing gets missed when April rolls around.

Want to stop stressing about taxes? Set up a time to talk about your situation.

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This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary by individual circumstances. Consult a qualified tax professional regarding your specific situation.