Which tax form do businesses use to report their income and expenses?

In the context of reporting income and expenses for different types of businesses, the selected answer reflects that different forms apply based on the structure of the business entity.

Form 1065 is utilized specifically for partnerships, as it allows for the reporting of income, deductions, gains, and losses for the partnership itself, which then flows through to the individual partners’ tax returns. It accurately captures the partnership's financial activity but is not universally applicable to all business types.

Form 1120 is designed for corporations to report their income and expenses. It outlines a corporation's financial activities during the tax year and accounts for corporate tax obligations. Hence, it is specific to C corporations and does not address individual or sole proprietorship situations.

Schedule C is intended for sole proprietors to report their income and expenses. This form allows individuals running their business as sole proprietors to report profit or loss from their business on their personal income tax return.

The combination indicated in the answer explicitly identifies that both Form 1120 and Schedule C play crucial roles in reporting income and expenses for corporations and sole proprietors, respectively. Each form is applicable depending on the classification of the business, pulling the diverse organizational structures together under the correct reporting requirements.