Which business entity must file an annual income tax return?

The correct answer is that all businesses except partnerships must file an annual income tax return. This is due to the way different business entities are taxed under federal and state law.

Partnerships are generally considered pass-through entities, meaning that the partnership itself does not pay income tax at the entity level. Instead, the income, deductions, and credits pass through to the individual partners, who report this information on their personal tax returns. As a result, partnerships do not file a traditional corporate tax return; they instead file an informational return which states the income and deductions, but it does not entail taxation at the partnership level.

In contrast, all other business forms, such as corporations, limited liability companies (LLCs), and sole proprietorships, are subject to different tax requirements. Corporations must file corporate tax returns (Form 1120 for C corporations), and even single-member LLCs, while considered disregarded entities for federal tax purposes, may still need to file tax forms if they have income. Sole proprietorships, while they do not file a separate business tax return, report their business income on the owner’s individual tax return using Schedule C, thus still adhering to the requirement of filing.

Non-profits also have their own obligations and often