When structuring your business, choosing the right tax form is essential to ensure compliance with IRS regulations and to optimize your tax benefits. Two commonly used tax forms are Form 1065 and Form 1120-S. Both serve different types of business entities and have their own filing requirements, deadlines, and tax implications. In this guide, we’ll break down the differences between Form 1065 and Form 1120-S to help you determine which one applies to your business.

What is Form 1065?

Form 1065, officially known as the U.S. Return of Partnership Income, is used by partnerships and multi-member LLCs to report income, deductions, gains, and losses. It is an informational return, meaning the business itself does not pay taxes. Instead, profits and losses pass through to the partners, who report them on their individual tax returns.

Who Needs to File Form 1065?

According to the IRS instructions, any partnership engaged in a trade or business or with gross income must file Form 1065. This includes general partnerships, limited partnerships, and LLCs with two or more members.

Form 1065 Filing Requirements

Key filing requirements include:

Reporting total income, deductions, and credits

Distributing income/losses to partners via Schedule K-1

Ensuring each partner reports their share on their personal tax return

Schedule K-1 and Instructions

Each partner receives a Schedule K-1 (Form 1065) detailing their share of the partnership’s income, deductions, and credits. Partners must include this on their individual tax returns. Following the Schedule K-1 instructions helps ensure accurate reporting and compliance.

Form 1065 Filing Deadline

The filing deadline for calendar-year partnerships is March 15. Since this date falls on a weekend in 2025, the new deadline is March 17, 2025. Businesses needing more time can file Form 7004 for a six-month extension.

What is Form 1120-S?

Form 1120-S, the U.S. Income Tax Return for an S Corporation, is used by S corporations to report income, deductions, and credits. Like partnerships, S corporations don’t pay corporate tax—income passes through to shareholders, who report it on their personal tax returns.

Who Can File Form 1120-S?

To file Form 1120-S, a business must:

Be a domestic corporation

Have no more than 100 shareholders

Have only one class of stock

Elect S corporation status by filing Form 2553

Form 1120-S Instructions and Filing Requirements

Per IRS instructions, S corporations must:

Report total business income, deductions, and credits

Issue Schedule K-1 (Form 1120-S) to shareholders

Ensure shareholders report their income on individual returns

Form 1120-S Filing Deadline

The deadline for calendar-year S corporations is also March 15. In 2025, this moves to March 17 due to the weekend. Businesses can request a six-month extension by filing Form 7004. Check out our Taxation Services to learn more.

Advantages and Disadvantages of Each Form

Pros and Cons of Filing Form 1065

Pros:

Flexible profit/loss allocation among partners

Avoids corporate-level tax (no double taxation)

Fewer structural restrictions than S corporations

Cons:

Partners pay self-employment tax

Requires detailed reporting via Schedule K-1

Limited ability to reinvest profits tax-free

Pros and Cons of Filing Form 1120-S

Pros:

Shareholders can receive dividends not subject to self-employment tax

Owners can be paid salaries, reducing corporate taxable income

Potential for a lower tax burden via tax-efficient distributions

Cons:

Strict eligibility and ownership rules

Must follow corporate formalities

Requires timely filing of Form 2553 for S corp election

Which One Should You Choose?

The choice between Form 1065 and Form 1120-S depends on your business structure and tax goals:

Choose Form 1065 if you have a partnership or multi-member LLC and want more flexibility in sharing profits.

Choose Form 1120-S if you have an S corporation and aim to reduce self-employment taxes by taking a salary and distributions.

Common Mistakes to Avoid

Missing deadlines: File Form 1065 or 1120-S on time to avoid penalties.

Incorrect K-1 reporting: Follow Schedule K-1 instructions carefully.

Choosing the wrong entity: Understand whether a partnership or S corporation suits your needs.

Forgetting elections: If filing Form 1120-S, don’t skip Form 2553.

Final Thoughts