Sole Proprietorships and Schedule C

Summary

This practice note provides an overview of the advantages and disadvantages of sole proprietorships and how they report income or losses from a business operated, or profession practiced, as a sole proprietor on Schedule C (Form 1040), Profit or Loss From Business (Schedule C). The practice note also outlines the client engagement process, the process a tax practitioner should follow when preparing Schedule C, how to establish a sole proprietorship, current considerations for 2025 tax year returns filed during the 2026 filing season, and helpful governing practices before the Internal Revenue Service (IRS) under Treasury Department Circular No. 230 (Circular 230). .