how much does a small business have to make before paying taxes
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How Much Does a Small Business have to Make before Paying Taxes?

An entrepreneur needs to know how much does a small business have to make before paying taxes. The idea on this matter is to know the taxable income for the growing company on hand. It is pivotal to understand this topic thoroughly when the business has just started. There will already be many expenses to cover for it to run. Therefore, paying taxes too early can be overwhelming for the small company itself. Unfortunately, it is not an easy thing to understand alone.

So, according to FreshBooks, any earning over $400 is within the range of taxable income. Of course, it applies to the so-called sole proprietor of any business today. It means that there is just one person who owns the company itself. Tax for small businesses is not a thing to worry about. The reason is that the company may not be reaching the possible amount of taxable income for the initial operating periods. Nevertheless, it is best to keep track of this matter closely.

On how much does a small business have to make before paying taxes, there are rates. There are different rates for different types of small companies. For the so-called sole proprietorships, the rate is only 13.3 percent. Meanwhile, small partnerships need to pay 23.6 percent while S corporation has its 26.9 percent tax rate. For a new entrepreneur, it can be overwhelming to understand all about this matter. Therefore, it is best to hire a professional in this field to handle this matter.

There is an example of taxation for a small business to make it simple. Regardless of how small businesses start, it is a must to file the report for the tax. For example, the owner reports a $5,000 net income for tax. If the rate for the tax is only 10 percent, the amount of tax to pay will be $500. It can be as simple as that. In other words, the amount of tax to pay depends on the amount of taxable income is in a filed report of the business. So, it is possible to alter it one way or another.

One thing that may help in understanding this is about the standard deduction according to Small Business Administration. The income that reaches over $12,400 for a sole proprietor will be taxable. It is that way on how much does a small business have to make before paying taxes.

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