How Are LLCs Taxed in Alabama?
From Tax Guide.
Tax Guide · Arab, Alabama
Which Business Tax Return Do I File?
Schedule C, 1065, 1120-S or 1120? Learn which federal business tax return matches each business structure and what each form is used for.
The short answer
Which tax return does my business file?
The return depends on how the business is taxed, not on what it sells: sole proprietors use Schedule C, partnerships use Form 1065, S corporations use Form 1120-S and C corporations use Form 1120.
Many owners assume the name of the business decides its return, and it does not. An LLC, for example, can end up on any of these forms depending on how many owners it has and what it has elected. Our guide on LLC taxes in Alabama explains that.
Start with the structure, then look at the form. If you are unsure how your business is classified, check any letter you received from the IRS when you applied for an EIN.
At a glance
What are the main business tax forms?
Each business structure has a matching federal return, and some are filed with your personal return while others are filed separately.
The table below lists the usual match. Alabama has its own returns for entities, and we check how they apply, so a federal form is only part of the picture.
| Structure | Main federal form | How profit is taxed |
|---|---|---|
| Sole proprietor (or single-member LLC) | Schedule C with Form 1040 | On the owner's personal return |
| Farm sole proprietor | Schedule F with Form 1040 | On the owner's personal return |
| Partnership (or multi-member LLC) | Form 1065, with K-1s to partners | Passed through to partners |
| S corporation | Form 1120-S, with K-1s to shareholders | Passed through to shareholders |
| C corporation | Form 1120 | Taxed at the corporate level |
Rental income of an individual often goes on Schedule E rather than Schedule C.
Sole proprietors
What is Schedule C and who files it?
Schedule C reports the profit or loss of a business you run yourself, and it is attached to your personal Form 1040.
Freelancers, small shop owners, gig workers and single-member LLC owners typically use it. Net profit is subject to income tax and generally to self-employment tax. Read our guide on self-employment tax for details.
A farm is reported on Schedule F instead. See farm and agricultural income taxes for more on that form.
Pass-through returns
What are Forms 1065 and 1120-S for?
Form 1065 is the partnership return and Form 1120-S is the S corporation return, and both report the business results and then pass them through to the owners.
Neither form usually results in tax paid by the business itself. Instead, each owner receives a Schedule K-1 showing a share of income, deductions and credits, and reports those amounts on a personal return. The K-1 can show income even if no cash was paid out to you, which surprises many first-time owners.
These returns are generally due before personal returns, because owners need the K-1 to file. Missing the deadline can bring penalties, so plan ahead. To compare S corporation and LLC treatment, see LLC or S corporation.
Corporations
What is Form 1120 and who has to file it?
Form 1120 is the return for a C corporation, which is taxed as its own entity on its profit.
C corporations pay tax at the business level. If the corporation later pays dividends to shareholders, those may be taxed again on the shareholder's personal return. That double layer is one reason many small businesses choose pass-through structures.
Corporations also have employees to think about. Owners who work in the business are typically paid wages, with payroll taxes and W-2s, which adds routine filing work.
Other filings
What other business forms might I need besides the main return?
Beyond the annual income tax return, many businesses also file payroll returns, information returns and state filings.
The list depends on what the business does, but these are the ones we see most often.
- Payroll returns, such as Form 941, and W-2s for employees
- Form 1099-NEC to independent contractors
- Depreciation on Form 4562
- Estimated tax payments for owners
- Alabama returns for the entity and the owners
- Sales tax returns, where the business sells taxable goods
How we can help
How Melton Tax Services can help with business returns
Our income tax preparation service covers businesses and the self-employed, and we can sort out which returns apply to you.
Whether you are a sole proprietor or an owner of a partnership or corporation, our income tax preparation team prepares the federal and Alabama returns and explains what each one reports.
We serve Arab and the surrounding area. Call 256-586-4635 or use our contact page. Bring your paperwork to the office, and please do not send Social Security numbers or documents through the website.
Answers
Questions about business return types
Do I file Schedule C or a separate business return?
If you are a sole proprietor or the only owner of an LLC taxed that way, you generally file Schedule C with your personal return. Partnerships and corporations file separate returns.
What is a K-1?
A Schedule K-1 shows an owner's share of a partnership or S corporation's income, deductions and credits. You use it to complete your personal return.
Why did my partnership return have a deadline before mine?
Pass-through returns are generally due earlier so that owners can receive K-1s in time to file. The deadlines are set by the IRS each year.
Is a 1099 the same as a business tax return?
No. A 1099 is an information form reporting payments. It does not replace the return that reports your income and expenses.
Does Alabama have its own business tax returns?
Yes, Alabama has its own filings for entities and for owners. Which apply depends on the structure, so we check how they fit with your federal returns.
What if I filed the wrong business return?
It can usually be corrected, though there may be penalties or an amended return. Call the office as soon as you notice, and bring what you filed.
Read next
Related reading
LLC or S Corporation: How the Tax Difference Works
From Tax Guide.
Starting a Business: Tax Checklist for New Owners
From Tax Guide.
Farm and Agricultural Income Taxes Explained
From Tax Guide.
Income Tax Services
A service Melton Tax Services provides.
Melton Tax Services
Questions about your taxes or your business?
Our team in Arab is just a phone call away, and we are glad to talk it through with you.