Question 19 of 35. If a sole proprietor converts their business to an S corporation, how is their income taxed? Compensation for services is taxed as wages reported on Form W-2. The owner's share of the business profit is reported on Schedule K1 and taxed as ordinary income. Compensation for services is reported on Schedule K-1 and subject to ordinary income tax and self-employment tax. All income from the business is reported on Schedule C (Form 1040) and is subject to ordinary income tax and self-employment tax All income from the business is taxed to the business. The business owner pays no income tax or self-employment tax. Mark for follow up