How business taxes differ by structure
How much tax a business owes depends heavily on its legal structure. Sole proprietors and single-member LLCs report business income directly on their personal tax return and pay self-employment tax (Social Security + Medicare, currently 15.3% combined) on top of regular income tax. S-corporations let owners split income into a salary (subject to payroll tax) and distributions (not subject to self-employment tax), which is why many small businesses elect S-corp status once profits grow. C-corporations pay a flat corporate tax rate and then owners pay tax again on any dividends -- the classic "double taxation" issue.
What this calculator estimates
Enter your net business income (revenue minus deductible expenses) and select your structure. The calculator applies the relevant self-employment tax and estimated income tax bracket to give you a rough total liability. This is meant for planning purposes -- setting aside quarterly estimated payments, for example -- not as a substitute for a tax preparer, since deductions like the Qualified Business Income (QBI) deduction, home office deduction, and retirement contributions can meaningfully change the real number.
Frequently asked questions
Do I need to pay estimated taxes quarterly? In most countries with self-assessed business tax, yes -- if you expect to owe more than a small threshold at year-end, quarterly estimated payments avoid underpayment penalties.
What expenses reduce my taxable business income? Ordinary and necessary business expenses: supplies, software subscriptions, a portion of home office costs, business travel, and contractor payments, among others. Keep receipts and categorize them consistently through the year.
Should I switch from sole proprietor to S-corp? It often becomes worthwhile once net profit consistently exceeds the cost of running payroll (roughly $40,000-$60,000/year profit is a common rule-of-thumb threshold), because it can reduce the portion of income subject to self-employment tax.