Small Business Tax Basics Explained

Understanding the nuances of US business taxes can save you money and keep you compliant with federal regulations.

In this guide, we’ll cover the essentials of small business taxes, the types to be aware of, how to file, and potential deductions that can benefit your bottom line.

*Disclaimer: The content and answers of this guide provide a general overview, but tax laws and regulations can be complex. It’s always recommended to consult with a tax professional or accountant for specific guidance tailored to your situation.

What are business taxes?

Business taxes are taxes imposed on businesses and corporations by government authorities.

These taxes are based on the business’s structure, operations, and location. Different types of businesses are subject to specific tax regulations and rates.

What are the types of business taxes?

Every business, regardless of its size, will have tax obligations. However, the type and amount varies.

Income tax: All businesses, except partnerships, must file an annual income tax return. Partnerships file an information return. The form you use depends on how your business is organized.

Sales tax: A percentage added to the sale price of products or services. Businesses collect this from their customers and remit it to the state or local government..

Self-Employment tax: Primarily for individuals who work for themselves. It covers Social Security and Medicare.

Employment taxes: If you have employees, you must pay their employment taxes. This includes withholding income tax and paying Social Security, Medicare, and federal unemployment taxes.

Property tax: A tax that a business needs to pay based on the assessed value of its owned properties, such as commercial buildings, land, or equipment.

Excise tax: This applies to businesses that manufacture or sell certain products, operate certain kinds of businesses, use various kinds of equipment, or receive payment for services.

Note: Nonprofits and cooperatives have distinct tax obligations to be aware of.

What’s the difference between personal and business taxes?

Unique forms, deadlines, rates, and deductions are just a few ways that filing business taxes differs from your personal taxes.

What to know about IRS regulations

Don’t get surprised by your business tax obligations by taking the time to understand the basics of navigating the tax system.

Filing your business taxes

With the right information and preparation, filing taxes can be smooth. First, be aware of deadlines, have all the necessary documentation, and understand your tax obligations.

How to apply for a federal tax identification number

You must have state and federal employer identification numbers (EIN) to legally hire employees, pay federal and state taxes, apply for licenses and permits, and open a business bank account.

Tax filing tips for new businesses

Here are four useful tips to make sure you file your taxes correctly.

Why you may want to file your taxes online

Learn why using a cloud-based tax filing service may be your best option as a small business.

How to pay quarterly business taxes

Here’s what quarterly taxes are, how to pay them, and what you need to know when filing your tax returns.

Small business tax deductions and breaks

Understand and leverage small business tax deductions to significantly reduce your tax bill.

What you can and cannot deduct as a new business

Don’t expect that you can deduct every business expense. Here are the most common tax breaks to expect from running your business.

Business tax write-offs explained

Learn what does and doesn’t qualify as a cost you can deduct.

Do you get a tax break for starting a business?

You’re likely looking for any opportunity to reduce your taxes as a new business. But are there deductions for just starting?

Employment taxes

If you have employees, you’re responsible for several additional taxes.

Federal income tax withholding: As an employer, you must withhold federal income tax from your employee’s wages.

Social security and medicare taxes: Employers must withhold a part of social security and Medicare taxes from employees’ wages and pay a matching amount.

Federal unemployment (FUTA) tax: This tax is not withheld from employee wages but is paid by the employer.

Check out these additional resources to understand taxes for different employee classifications.

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Tax implications for different business structures

Your business structure directly influences your tax obligations. Check out these resources to learn the unique tax implications of each structure.

How sole proprietorships are taxed

Understand how registering as a sole proprietor impacts your taxes.

How partnerships are taxed

Understand how registering as a partnership impacts your taxes.

How LLCs are taxed

Understand how registering as an LLC impacts your taxes.

How are corporations taxed?

Understand how registering as a corporation impacts your taxes.

Small business tax tips

Improve your understanding of business taxes with industry-specific tips and resources.

How to deal with online sales tax

Understand your tax liabilities as an eCommerce business and how to manage and report online sales tax.

Tax tips for food truck owners

If you’re starting a food truck, here are the tax considerations and deductions to be aware of.

Taxes are just part of running a legitimate business

Understanding small business taxes is crucial for any entrepreneur.

With the right knowledge and preparation, you can ensure compliance, optimize deductions, and set your business up for financial success.

But tax obligations are just part of the legal requirements you need to check off to start a business. While most can be completed in any order, here are some we recommend you explore: