Small businesses in Georgia and throughout the country can be subject to income, payroll and other types of taxes. For instance, a corporate entity may pay a tax rate of up to 21% on their profits for the year. Companies that are structured as pass-through entities typically won’t pay taxes at the business level. However, the owners will be required to pay income taxes at the personal level.
If a business is structured as an LLC, it will be considered either a disregarded entity or a partnership by default. This means that the profits and losses that it generates still pass through to an owner’s personal tax return. Sole proprietors or sole owners of an LLC will report their profits or losses for the year on Schedule C. If a small business opts to be taxed like a corporation, owners may be taxed twice on their earnings.
In addition to paying taxes on income earned as an employee, they may also pay taxes on any dividends that they receive from the company. Small businesses may be entitled to take the qualified business income deduction, which allows most organizations to reduce its taxable income by up to 20%. In other words, a company that made $50,000 in a given year may only have to pay tax on $40,000 of that money.
Ideally, small business owners will use corporate and business tax lawyers and accountants to organize and submit their corporate or personal returns. This may reduce the chances that a business owner is audited or misses out on an income tax break. If a person has received an audit notice, an attorney may be able to negotiate directly with the IRS.