The structure of your business significantly impacts your tax responsibilities. For instance, in a sole proprietorship, business income is reported on your personal tax return. Partnerships require a separate tax return, but profits and losses pass through to individual partners. Corporations are taxed as separate entities, which may result in double taxation—once on corporate income and again on dividends. LLCs offer flexibility in taxation, allowing them to be taxed as sole proprietorships, partnerships, or corporations.