Form 1120-S vs. Form 1065
Last updated:
-by Nikhil Chowdary | TaxZerone
Form 1120-S vs. Form 1065 at a Glance
Form 1120-S is generally filed by eligible S corporations, while Form 1065 is filed by partnerships and LLCs taxed as partnerships. Both are pass-through tax returns, but their ownership, compensation, and tax rules differ.
- Form 1120-S: Used by eligible S corporations. Income, deductions, and credits generally pass through to shareholders, who receive Schedule K-1.
- Form 1065: Used by partnerships and qualifying multi-member LLCs. Partnership income, deductions, and credits generally pass through to partners, who receive Schedule K-1.
- Ownership: S corporations generally have a 100-shareholder limit and restrictions on eligible shareholders and stock classes. Partnerships generally have more flexible ownership rules.
- Which Form to File: The correct form depends primarily on the business's legal structure, tax election, ownership, and applicable IRS requirements.
Choosing between Form 1120-S and Form 1065 depends on how your business is organized and taxed. Both forms report pass-through income to business owners, but they differ in ownership rules, compensation, self-employment taxes, and filing requirements.
This guide compares IRS Form 1120-S vs Form 1065, explains when each form is required, and helps you determine which return your business should file.
Table of Contents
S Corporation vs Partnership
| S Corporation | Partnership / LLC |
|---|---|
| Form 1120-S Filed by corporations or LLCs that have elected S Corp status via Form 2553.
| Form 1065 Filed by partnerships and multi-member LLCs taxed as partnerships.
|
Major Differences Between Form 1120-S and Form 1065
| Feature | Form 1120-S (S Corporation) | Form 1065 (Partnership/LLC) |
|---|---|---|
| Who Files | S Corporations | Partnerships & multi-member LLCs |
| Taxation | Pass-through; shareholders report income | Pass-through; partners report income |
| Self-Employment Taxes | Salary subject to payroll tax; distributions not | Entire share generally subject to self-employment tax |
| Compensation Rules | Shareholders can be employees | Partners cannot be employees |
| Profit Distribution | Must follow ownership percentages | Flexible distribution arrangements |
| Filing Requirements | Form 1120-S + Schedule K-1 for each shareholder | Form 1065 + Schedule K-1 for each partner |
| Ownership Restrictions | ‰¤100 shareholders; only individuals, certain trusts/estates; U.S. persons only | No restrictions on number or type of owners |
| Due Date | March 15 (or 2.5 months after year-end) | March 15 (or 2.5 months after year-end) |
| Complexity | More compliance & IRS rules | Simpler structure, flexible agreements |
Note : Refer our Form 1120 S Instructions and the Instructions for IRS Form 1065 for detailed guidance.
Eligibility Requirements
| To file Form 1120-S | To file Form 1065 |
|---|---|
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Comparing Tax Treatment for S Corporations and Partnerships
| Tax Treatment | Form 1120-S (S Corporation) | Form 1065 (Partnership) |
|---|---|---|
| Compensation | Shareholder employees receive a salary. | Partners receive guaranteed payments or profit distributions. |
| Payroll Taxes | Salaries are subject to payroll taxes. | Partners are generally not subject to payroll taxes. |
| Self-Employment Tax | Distributions are generally not subject to self-employment tax. | General partners generally pay self-employment taxes on business income. |
| Tax Advantage | Salary and distribution may reduce self-employment tax. | Business income is generally subject to self-employment tax. |
Reporting and Filing Requirements
| For S-Corporations | For Partnerships |
|---|---|
| File Form 1120-S annually | File Form 1065 annually |
| Provide each shareholder a Schedule K-1 | Provide each partner a Schedule K-1 |
| May also need to file state corporate returns, depending on jurisdiction | Partners include their share on Form 1040 |
Original Filing Deadline
March 15
- For calendar-year businesses, Form 1120-S and Form 1065 (or the next business day if it falls on a weekend or holiday).
- Fiscal-year filers must file by the 15th day of the third month after their tax year ends.
Which Form Should You File?
| Choose Form 1120-S if… | Choose Form 1065 if… |
|---|---|
| You qualify as an S corporation. | You operate as a partnership or multi-member LLC |
| You want to reduce self-employment taxes by splitting compensation into salary and distributions | You want flexibility in how profits are allocated among owners |
| Your ownership is limited to U.S. persons and fits within IRS restrictions | You don't want restrictions on who can hold ownership |
Making the Right Filing Choice for Your Business
Both Form 1120-S and Form 1065 are used for pass-through taxation, but they differ in structure, ownership rules, and how income is taxed. Partnerships (Form 1065) are simpler and more flexible, while S Corporations (Form 1120-S) often provide tax savings through payroll and distribution strategies.
Choosing the right filing depends on your business structure, ownership goals, and tax planning strategy.