Business is a combination of art and science. It’s an art as you are creating a thriving and growing entity that solves real problems for other people. It’s a science in the technical and financial decisions that you need to make and make correctly lest your business becomes another statistic. One of those technical and financial things that you’re going to have to deal with is taxes.
Most who have traded in the 9-5 for owning their own business do so for one of these reasons:
- A desire to be their own boss
- Fulfillment and creating their own opportunities
- Lack of real employment opportunities
While all of these reasons are valid they don’t really prepare you for what to expect as a business owner. Most lessons that you learn about business you will get through experiences. One of the very real experiences you will get as a business owner is learning about and paying taxes. Taxes are inevitable and you will pay them at the local, state and federal levels.
What You Need to Know About Business Taxes
Here are some of the ways that your business will be taxed. You will have to pay income, personal property, business, franchise and excise, sales and real property taxes. That’s a lot of tax codes you’re going to have to learn your way around. When you make your first sale or sign on your first client, the last thing on your mind is how much you’re going to have to pay in taxes. A painful lesson you will learn you’re first year in business is how you are not only working for yourself but the government too. You are responsible for paying taxes on income that your business has earned. The biggest tax burden that you will have to deal with is the small business tax.
Small Business Income Tax
When you run a business you need to understand that you’re not just working for yourself, but also working to pay your taxes. Here’s an example, say you sell you a widget to a customer for $100, and the cost to you for that widget is $50, you’re left with $50 profit. Not only are you liable for the taxes on the $50 sale, but you might also be liable for taxes on the $100 sale to begin with.
Taxes are complicated at every level and when you’re in business it’s even more so. There are different levels of taxes and all of them have deductions you can take advantage of too. Every small business owner should take advantage of the services of an accountant to help you navigate the complicated tax codes.