As newcomers to the world of business, one thing we have to know about is taxes. It’ll no doubt help to have some knowledge beforehand about the taxes that we have to pay as soon as our business starts churning money. If you’re paying taxes, then congratulations… because it shows that you have built a successful business. There are, in general, three types of taxes you should become familiar with:
• Self Employment Tax
• Income Tax
• Payroll Tax
Self Employment Tax. Whether or not you pay this tax depends on your structure. Typically sole proprietors and limited liability companies (LLCs) have to pay this, but again it depends on how you setup your business and your state. This is tax on what you pay yourself in your business and can be minimized by incorporating.
Income Tax. If you make a profit, then you have to pay income tax. Sometimes tax is required quarterly depending on how much revenue you have.
Payroll Taxes. As an employer, you have to pay payroll taxes. Payroll tax goes towards Medicare , FICA, and social security. In Texas, payroll taxes are 29% of a person’s salary. You can minimize these taxes by hiring independent contractors instead of employees. Learn the difference between contractors and employees or the IRS could come after you.
You can find out more through your state’s tax website or www.irs.gov. This is also where accountants can come in handy – and keep you out of trouble!
- Bryan Daigle
President & Founder of ideatango.com – the #1 site for inventors & invention ideas For more good info & advice, check out the official IdeaTango Blog
