Tax Preparation 101: Breaking Down Small Business Taxes

Tax Preparation 101: Breaking Down Small Business Taxes

Did you know that according to the U.S. Small Business Administration, there will be 33.2 million small businesses in 2024? That’s a staggering number of companies, each facing their own unique tax preparation challenges and responsibilities. 

As a small business owner, understanding taxes can feel dreadful. But it doesn’t have to be this way. 

At Ceterus, our tax team all have small business expertise. Whether you’re an existing customer or a potential one we aim to keep your confidence level at a 10/10. That’s why we’ve compiled this guide to help you tackle your tax obligations head-on. 


Business Structures

First, it’s important to note that tax rules vary depending on your business structure. There are four main categories of these, which are as follows:

  • Corporation: The only business type required to pay federal taxes based on net earnings at a flat 21% rate.
  • Partnership: This is a business owned by two or more. Each partner is taxed on their allocation of the business’s net income.
  • Limited liability corporation (LLC): LLCs are also taxed based on their share of the business’s net income. If an LLC has multiple members, it is taxed as a partnership.
  • Sole Proprietorship: This is an unincorporated business owned by an individual. You must file an income tax return if you’re a sole proprietor or independent contractor and your net earnings from self-employment were $400 or more in the year, as per the IRS.


Four Different Types of Small Business Taxes

Income Tax

This taxation applies to the income earned by businesses. All businesses must file a yearly income tax return, except for partnerships which file an information return.


Self-Employment Tax

Self-employment tax is primarily for individuals who work for themselves and covers Social Security and Medicare taxes. This tax applies to you if you’re a freelancer, independent contractor, or sole proprietor. It’s calculated based on your business’s net earnings.


Payroll Tax

Payroll taxes are taxes employers withhold from an employee’s salary and pay directly to the government. They include two main types: withholding tax and employment tax. 

  • Withholding tax = federal, state, and local income taxes
  • Employment taxes = Social Security and Medicare taxes


Sales Tax

Sales tax is a state-imposed tax on the sale of goods and services collected by the business at the point of sale. As a small business owner, if you sell goods or services subject to sales tax, you’re responsible for collecting this tax from your customers and dispatching it to the appropriate tax authority.


Last Reminder – Tax Deadlines

  • March 15, 2024: Deadline for partnerships, S corporations, or LLCs taxed as partnerships
  • April 15, 2024: C corporation tax returns, personal returns, and extensions
  • September 16, 2024: Partnership or S corporation returns (if you requested an extension)
  • October 15, 2024: Sole proprietorships and corporations with extensions

Ceterus As Your Tax Resource

At Ceterus, we simplify tax planning and preparation for small business owners. Our team of experts is on hand year-round, offering strategic advice and ensuring you maximize savings while complying with all laws and regulations.

We handle all tax obligations accurately and on time, from federal and state to sales and personal property tax. We also provide financial clarity by identifying potential tax savings and creating a comprehensive tax strategy, helping you understand and achieve your financial goals.

No matter your business structure – Corporation, Partnership, or Sole Proprietorship – we’ve got you covered. Plus, if you entrust us with your personal taxes, we’ll take care of every detail meticulously.

Relieve your tax anxieties with Ceterus. Schedule a call today to learn how we can help you better understand and manage your tax requirements. 

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