Doing Business: The Realities
Business is both science and art. Art is when you try to create and manage a business that solves real problems and reduces pain. Science is the recognition that there are technical tasks you need to complete in order to avoid business failure. Taxes is one of those technical tasks.
We are all motivated to join small businesses for these reasons:
Availability of employment opportunities
Want to be your own boss?
Fulfillment and adventure in life
Although these reasons are admirable and essential, they don’t prepare you for what lies ahead. Experience is the best way to learn about business. These experiences should not prove to be too tricky or fatal for the business owner. Paying taxes in the US is an authentic experience for anyone who lives in the country.
Types of small business taxes
Here are some examples of how small businesses can be taxed.
Personal property tax
Taxes for businesses
Franchise and excise taxes
Real property tax
The governing authorities administer these taxes to ensure compliance and payment. The last thing you want to think about when you apply for your permit and/or business license is how much you will pay. You are concerned with making your business profitable and generating profit. The best thing about running a business in the US is the fact that you work for your own benefit as well as the government. It is not a bad thing. You have the freedom to work as hard as you like and earn as much money as you wish. However, the government will not be able to monitor your business if you do not comply with the laws and regulations of the industry. You are responsible for all taxes incurred by your company. Income tax is the leading tax for small businesses.
Tax on small business income
Understanding the small business income tax is best understood by thinking about how you work for yourself and pay taxes. Let’s assume you sell a product for $5. You spent $2.50, which includes variable and fixed costs. The sale generated a profit of $2.50. You are now responsible for paying tax on the $2.50. You may also owe tax on the $5 sale, depending on which type of business it is. What is the main lesson in this example? This is a simple but powerful lesson that you can understand once you really get it. You are in business to make money and to build wealth. However, you also have to pay taxes. It’s not a bad thing once you realize that it’s the way business works in the US. This is part of the cost of being a US citizen living in the most excellent economy in the world.