Part 2 — Businesses

Sole proprietorship, partnership, C corporation, and S corporation. Other entities (LLCs) default into one of these classifications.

It is not a separate taxable entity; business income and expenses are reported on Schedule C of the owner's Form 1040, and net profit is subject to income tax and self-employment tax.

Schedule SE, which computes Social Security and Medicare tax on net self-employment earnings.

15.3% total (12.4% Social Security up to the wage base plus 2.9% Medicare with no cap), applied to 92.35% of net self-employment earnings.

One-half of the self-employment tax is deductible as an adjustment to gross income.