According to the United States Department of State, some 19.6 million Americans work for companies employing fewer than 20 workers, 18.4 million work for firms employing between 20 and 99 workers, and 14.6 million work for firms with 100 to 499 workers; by contrast, 47.7 million Americans work for firms with 500 or more employees.

Among the small businesses are the sole-proprietors. A sole proprietorship is an unincorporated business owned by an individual. A sole proprietorship has no existence apart from its owner. Business debts are personal debts of the owner. A limited liability company (LLC) owned by one individual is treated as a sole proprietorship for federal income tax purposes, unless the owner elects to treat the LLC as a corporation.

If you are a sole proprietor, you already know that you must report all business income or losses on your personal income tax return; the business itself is not taxed separately. (The IRS calls this "pass-through" taxation, because business profits pass through the business to be taxed on your personal tax return.)

Schedule C (Form 1040) must be used to report income or loss from a business you operated or a profession you practiced as a sole proprietor.

An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business.

Schedule C is also used to report (a) wages and expenses you had as a statutory employee, (b) income and deductions of certain qualified joint ventures, and (c) certain income shown on Form 1099-MISC, Miscellaneous Income.

Small businesses and statutory employees with business expenses of $5,000 or less may be able to file Schedule C-EZ instead of Schedule C.

As sole business owner, you’ll be taxed on all profits of the business (that’s total income minus expenses) regardless of how much money you actually withdraw from the business.

Therefore, to keep your small business profitable, you should take every available business deduction on your Schedule C, and not only.

To be deductible, a business expense must be both ordinary and necessary.

An ordinary expense is one that is common and accepted in your trade or business.

A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

The major business expenses are:

• Startup expenses,

It is important to separate business expenses from the following expenses:

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold unless you are a small business taxpayer (defined below).

Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

For tax years beginning after 12/31/2017, a small business taxpayer is a taxpayer that (a) has average annual gross receipts of $25 million or less for the 3 prior tax years and (b) is not a tax shelter.

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.