Final answer:
Unincorporated entities are classified for tax purposes based on the form of business organization they have, such as sole proprietorship, partnership, or LLC.
Step-by-step explanation:
Unincorporated entities are classified for tax purposes based on the form of business organization they have, such as sole proprietorship, partnership, or limited liability company (LLC). For tax purposes, a sole proprietorship and partnership are not separate legal entities from their owners, so the owners report the business income and expenses on their individual tax returns. An LLC is a separate legal entity, but can choose to be taxed as a sole proprietorship, partnership, or corporation.