They file tax returns under the personal income tax for both federal and New York State purposes using federal Schedule C to compute their business profit or loss. Many farms are also organized as a type of sole proprietorship. The farm owner may hire workers and pay them wages subject to withholding tax. The farmer will also pay tax under the personal income tax, but will use federal Schedule F to compute farm profit or loss. Partnerships are another small business form.
Partners pay income tax on their distributive share of income derived from the partnership.
The partnership entity also files informational returns with the State and federal governments. Appendix A provides additional detail concerning LLCs and LLPs in New York State. Some small businesses decide to incorporate. Small businesses, including some farms, may choose this organizational form to insulate the business owners from liability. General business corporations with 75 or fewer shareholders can elect subchapter S status for both federal and New York State tax purposes.