If you are a business owner you will realize that paperwork and taxes constitute a major portion of your operations. In addition to being worried about and concentrating on products, services, employees and customers, you also need to keep all the filings in order.
Any lapse on that front can result in a number of problems. For example, you and your business can come under scrutiny from various legal and taxation authorities. You could also be fined for delaying payments in the form of taxes. In the worst scenario possible, the authorities could also withdraw your licenses and compliances.
This is the reason why most businesses work with their own legal and accountancy firms to ensure that they do not get embroiled in such areas. In this article, we are going to discuss the five main types of taxes, every business must pay and should be aware of.
List of 5 Different Types of Business Taxes you should be aware of
1.Business Income Tax-
Just like you have private Income Tax for individuals, businesses too have the same. As business is a separate individual entity having its own records, books and accounts, it needs to pay a percentage of its earnings and revenues in the form of income taxes.
If your business is making a profit, you need to pay taxes. However, most businesses are categorized as entities of a ‘pass-through’ nature. This means that the total cumulative business tax passes through to the owners of the business. It depends on the kind of business set up.
2.Products and Services Sales Tax-
Even though your business might not end up paying business income tax, it will have to pay sales tax on your company’s products and services. According to experts sales tax filing constitute one of the most important kinds of taxations for any business.
Another thing, which businesses need to concentrate on is that the sales tax filings should be done in a regular and periodic manner. In other words, you should not skim on these taxations under any circumstances as you are already collecting the same from the consumers.
3.Payroll Taxes on Employees-
All over the world, governments are pretty strict when it comes to employee taxes. In very simple words, this refers to the income tax, which the company’s employees need to pay in your organization. Rather than hold the employees responsible, authorities hold employers.
FICA taxes, FUTA taxes, and Federal Income taxes are some employee taxes you need to clear out as a business. Withholding the same from the taxation authorities amounts to a serious breach of the legal process and can invite hefty fines.
4.Property Tax for Businesses-
You need to worry about this form of tax as a business only if you own property in the name of your company. For example, if you own your own office space, or a factory or a warehouse to store goods. This is usually state taxes and depends upon region to region.
You need to understand that the tax on commercial holdings is assessed just like a residential house is. Property taxes need to be cleared quarterly or annually, depending on what you are comfortable with. Failure to comply might affect your electricity and water supply.
5.Business Owner Estimated Taxes-
As a business owner, you are not drawing a salary like your other employees are. However, since you own the company, you need to clear out estimated taxes based on profits and income of your business. The IRS stipulates that this form of tax needs to be paid regularly.
You need to understand that the estimated taxes combine two elements- business income and personal income. It also includes taxes of a self-employment nature. Clearing the same regularly, will not burden you with one-time huge payments.
The Final Word
Keeping a track of so many different kinds of taxes can be exhausting and time-consuming. This is why you should enlist the services of experts who are adept at dealing with these things. This will allow you to concentrate on your business at all times.