If a sole propristor converts their business to an 5 coeporation, how is their ineome taxed? Compensatian for servioes is taked as wages reported on Form W.2. The owner's ahare of the zutiness prote is reported on! Schedule K-1 and taxed as ortinary income. Compensation for services is reported on Schedule K-t and subject to ondiney income tax and self-employment tax. Al income from the business is reported cen Schedule C (Form 1040) and is subject lo ordinary income tax and selt-empioyman All income from the business is taxnd to the business. The business ownor pwys no incocte thx or seif-empliojmect lax