Profits from a sole proprietorship are reported as taxable income and is reported on Schedule C (Profit or Loss From Business) of the proprietor's Form 1040 (US Individual Tax Return).
Explanation:
A sole proprietorship can be defined as the business ran or operated by a single individual. They are generally self-employed and must pay the self employment (SE) tax on the income that the individual earned from the business.
The Schedule C is the income statement of the proprietor for the financial year. To complete this schedule, the profit of the business is evaluated by including all the expenses and income with the cost of the sold goods.
The resultant is called the net income (income - expenses) of the business which is also known as the taxable income of the business.
