Which tax form is required to report business income for a sole proprietorship?

• A. Form 1065
• B. Schedule C (Form 1040)
• C. Form 1120
• D. Schedule E (Form 1040)

Answer: (B)

Schedule C (Form 1040) is used to report income or loss from a sole proprietorship. It is specifically designed for self-employed individuals who operate a business independently. This form allows the business owner to detail their business income and deduct allowable business expenses, which ultimately impacts their taxable income.

In contrast, Form 1065 is used for partnerships, and Form 1120 is designed for corporations. Schedule E, on the other hand, is primarily for reporting income from rental real estate, royalties, and certain partnerships—not for sole proprietorships. Therefore, Schedule C is the appropriate form for a sole proprietor to accurately report their business earnings.