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From small home businesses to significant companies, sole proprietors hold the reigns of many companies. Like any business, filing taxes as a sole proprietor can be simple or complex depending on the size and nature of your business. Many sole proprietors are smaller businesses with few employees.

These companies are frequently not incorporated because the owner is at risk for nearly everything owned regardless of how it is held. If they are incorporated, they must file taxes like any other corporation and pay corporate rather than personal income taxes. Those companies do not run like sole proprietorships, but more like any other company with well-developed corporate structures.

For the owner/operator of a small business, filing their taxes is not a great deal different than filing personal income taxes. Instead of starting with the front of the 1040 form and a few W-2 forms, the unincorporated sole proprietor begins tax preparation with Schedule C to develop a profit and loss for the business. The owner's name and social security number go at the top of the form.

If the business has a name separate from the owner's, it will need to be listed. The type of business is asked for on the form. The owner has to designate whether the business is on a cash basis or uses accruals. If the company is a retail outlet or has retail as a part of the business, the form will need to know the income of the company less the cost of goods sold.

If it is not a retail operation, there will not be a cost of goods sold. From here, a somewhat itemized list of expenses by preset designations need to be listed. Any variations from the headings provided need to be specified. The final few lines of the expense section allow the sole proprietor to list expenses specific to this type of business.

The various expenses are total and subtracted from the net income on the upper portion of the schedule. Items like a car used for business purposes or an office in the home may require additional schedules to be completed.

The final net income or loss has to be recorded on the proper line of the front of the current year 1040 form. If there is a profit, it must also be carried to Schedule SE to compute self-employment taxes. This form will call for a reduction of the amount by a set percent followed by the computation of 15.3% of the new total. This number is recorded as taxes due on the back of the 1040 and 1/2 of this number is recorded as an adjustment to income on the bottom of the front of the 1040 form.

If quarterly taxes have been paid, these should be indicated on the correct line of the back of the 1040 form. From this point, the taxes should be filled out as if they are a personal return. Personal deductions may be itemized on Schedule A. Interest and dividend income needs to be documented on the appropriate forms. Stock profit and loss has to documented the same as always.

All other income has to be reported appropriately. Use the adjusted gross income and compute income taxes due. Add and subtract taxes due and taxes paid to arrive at a final total indicating a refund or amount due to the IRS.

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