Owning a small business in Oregon can be a great way to fulfill a dream and become financially independent. While assembling the financial aspects of your business plan, account for the many taxes that you can expect to pay.
Accion breaks down taxes that small business owners have to pay. See how to plan your company’s finances for the next tax season.
How much income tax you pay and how you pay it depends on whether you classify your business as a partnership, sole proprietorship, corporation or a limited liability corporation. Expect to pay income taxes as part of your personal return or as a separate business return.
S corporation shareholders, the self-employed, partners and all sole proprietors have to make estimated tax payments throughout the year. You may be unfamiliar with this if you spent years working for an employer, who has to make estimated taxes on dividends, interest, rent, profit and the like. Talk with a business accountant for an idea on how much you should pay every quarter.
Working for yourself means that you have to pay self-employment tax for Medicare, FICA and Social Security. Paying this tax allows you to take advantage of Medicare, survivor, disability and retirement benefits.
Payroll and employment taxes
Do you have employees? If so, you need to pay employment and payroll taxes, including those mentioned above for self-employment tax. Talk with an accountant about paying federal unemployment tax.
Account for state taxes while budgeting for small business taxes. State taxes work much like federal taxes in terms of when and how much you pay, but you also need to educate yourself on workers’ compensation insurance and state unemployment.
Prepare for tax season throughout the year. Doing so gives you one less thing to worry about as a business owner.