Having our own business comes with many different challenges and responsibilities and making sure we overcome all of them while remaining compliant with all our requirements can be tough at first. However, if we took the time to work on a business plan, we might already have a clear idea of the steps we need to take. Part of these responsibilities includes paying our company’s taxes, whether we need to do this quarterly or annually. These are some of the taxes you need to be aware of when you start or own a business.
To begin with, every business must pay taxes on the profit they generate, which corresponds to their total income minus deductible expenses. Small business owners, partners in corporations, and owners of S-Corps can pay these taxes through their personal income tax returns. However, sole proprietors and members of single-member LLC’s need to file a Schedule C and include it in their personal return.
Depending on the state our business operates, our company might be subject to paying sales taxes on the products and services we sell, which may also vary from one state to another. Nonetheless, companies in most states are required to collect sales taxes and pay them to the department of revenue of each state. These taxes also include the items and services we offer online, which may be required for specific types of online stores.
If our company owns buildings, land, or any other type of real estate, we will be subject to property taxes, which are paid to our local taxing authorities, such as the city or the county our property is located at. These taxes are determined based on the assessed value of our property, and even when a portion of these can be deductible, we need to consult with the IRS before assuming our property expenses are eligible for a deduction.
These correspond to Social Security and Medicare, and sole proprietors and partners must pay them based on their business’s income. This is because business owners, proprietors, and partners do not qualify as employees of their companies, which means that they cannot withhold these taxes that way. The only ones who would be exempt from self-employment taxes are the owners of corporations who work as employees.
Companies are also required to pay taxes on employment or payroll corresponding to the earnings of our employees. These taxes must be paid to both the IRS and the Social Security Administration. Employment and payroll taxes are used to cover different types of taxes, including FICA taxes, unemployment, and workers’ compensation taxes on both federal and state levels.