Everything You Need to Know About Small Business Taxes

Who it’s for:

• Small business owners

• Sole proprietors and self-employed entrepreneurs

• Business owners who want clarity on tax obligations

• Anyone planning their next tax year with better insight

Key Takeaways:

• Small business taxes include income tax, self-employment tax, payroll tax, excise tax, and local taxes.

• Your business structure determines how you file and how much you pay.

• Clean financials help you stay compliant and maximize deductions.

• Federal income taxes apply to taxable business income after expenses.

• Payroll responsibilities apply when you have employees.

• Working with a tax professional helps you avoid errors and uncover tax savings.

Small business taxes can feel overwhelming. You work hard to grow your company and serve clients, only to be overwhelmed when tax season arrives with a long list of forms and deadlines. The good news is that most businesses can understand their tax obligations once they know how to calculate what they owe and how clean financials keep everything simple.

At Steady Co, we help small business owners stay up to date with tax laws and organize taxable business income so they can file taxes with clarity and confidence. This guide explains the essentials, from federal income taxes to payroll taxes, so you can stop guessing and start planning.

What Are Small Business Taxes?

Small business taxes are the federal, state, and local taxes that small businesses must pay when they earn income and hire employees. Your business structure determines which taxes apply and how you file.

In most cases, your company will pay a combination of:

• Income tax

• Self-employment tax

• Employment taxes for employees

• Property tax depends on your location

• Excise tax if your industry requires it

• Payroll tax for wages

• Federal taxes, such as federal income taxes

Understanding these categories helps you plan ahead instead of scrambling at the end of the tax year.

How Your Business Structure Affects Your Taxes

Your business entity determines how the IRS treats your profit and which forms you complete.

Sole Proprietorship

Most small businesses operate as sole proprietors. You report business income and expenses on Schedule C as part of your personal tax return. You pay income tax and self-employment tax on your net profit.

Partnership

Partnerships file Form 1065 and issue K-1s to partners. Each partner reports their share of net earnings on their own income tax return.

Limited Liability Company (LLC)

A limited liability company can be taxed as a sole proprietorship, partnership, S corporation, or C corporation. The tax impact depends on how you elect to file.

S Corporation

Small S corporations often reduce self-employment tax for business owners with the right structure and payroll system. The company files a separate corporate return and a separate owners' report for pass-through income.

C Corp

A C corp pays its own federal income taxes, and owners pay tax on dividends they receive. This creates double taxation in some situations, but it can offer planning benefits.

Most businesses start simple and grow into more advanced structures as revenue increases. A tax advisor can help you determine the best approach for your goals.

The Main Taxes Small Businesses Pay

1. Federal Income Tax

You pay income tax on your taxable business income after deducting eligible expenses. You report this to the IRS annually.

2. Self-Employment Tax

Sole proprietors and partners pay self-employment tax to cover Social Security and Medicare taxes.

3. Employment Taxes

If you have employees, you must withhold and pay:

• Payroll tax

• Social Security

• Medicare

• Federal unemployment

Employers must deposit these payments on time and file accurate payroll reports.

4. Property and Local Taxes

Many cities and counties require local taxes, including property taxes on equipment or commercial space.

5. Excise Tax

Some industries must pay excise tax on fuel, transportation, manufacturing, or other regulated activities.

What Income Does a Small Business Report?

Small business owners report all business income they receive during the accounting period. This includes:

• Revenue from sales and services

• Online income

• Contract work

• Rental income

• Any money earned by the business that counts as taxable business income

Your net profit is the amount left after subtracting expenses. This is the number the IRS uses for most tax purposes.

Key Tax Deductions and Tax Credits

Tax deductions lower your taxable income, and tax credits reduce your final tax bill. Common deductions include:

• Supplies and equipment

• Business travel

• Rent

• Payroll

• Insurance

• Contract labor

• Utilities

• Business mileage

• Software

• Professional fees

You can also claim certain tax credits, such as employee-related credits, energy improvements, or specific industry incentives.

Good bookkeeping ensures you never miss deductions or tax savings.

How To File Your Small Business Taxes

Most small businesses file taxes electronically through e-file, which is the fastest and most accurate method. You will need:

• Organized financial records

• Income reports

• Expense categories

• Payroll summaries

• Tax forms for your business structure

• Your accounting period details

• Prior year AGI for some e-filing systems

Steady Co clients receive clean financials and accurate reports, meaning you'll experience a stress-free filing experience.

How To Lower Your Small Business Tax Burden

Small business owners can reduce their tax burden through thoughtful planning. Here are the best strategies:

• Track every expense

• Understand eligible tax deductions

• Separate personal and business accounts

• Pay quarterly estimated taxes on time

• Review your business structure to optimize taxes

• Invest in accurate bookkeeping

• Work with a tax professional who can guide tax planning year-round

Clean books produce reliable numbers, and reliable numbers are the foundation of real tax savings.

Final Thoughts

Small business taxes do not have to be confusing. Once you understand your tax obligations and how your entity type works, you'll have a good knowledge of what the IRS requires each tax year, and you can plan and avoid surprises. With the right systems in place, you can stay compliant and keep more profit.

If you want support with tax preparation, bookkeeping, payroll, or long-term tax planning, Steady Co is ready to help you get there. Schedule an appointment to meet with an expert today!