What You Need to Know about Small Business StartUp Taxes

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Small Business Startup Taxes

If you are a mompreneur who is starting a business, whether it’s in a physical location or online store, or both, there are some things you need to know about the taxes you may be subjected to.

Even if you’re going to hand over all your tax affairs to a qualified Accountant or Accounting firm, it’s helpful for you as a business owner to have a grasp of the basics.

In this article, we will be giving you some key pointers on small business startup taxes so you have a good idea of what to expect regarding taxation.

What you Need to Know About Small Business Startup Taxes

This article is an indication of taxes that you will need to pay, however, if you are unsure about anything tax-related, we recommend consulting with a tax professional in your area.

As a small business owner, you need to know some tax basics.  Even if you're going to hand over all your tax affairs to an Accountant or Accounting firm, here's what you need to know about small business startup tax.Income Taxes

Income taxes are a tax on payments that the startup company receives, whether from selling products, rendering services, or any other income sources.

Taxable Income equals gross income minus deductions.

  • Gross Income – Gains and receipt from all income sources, before deductions.
  • Deductions – Any expenses or items deducted from gross income to lower the amount of taxable income.

Federal Income Tax

Each business in the United States must file annual federal income tax returns, despite the business having no sales, profits, or any other business dealings.

All C corporations must file federal income tax returns and startups incorporated on Clerky are automatically classified as C corporations.

The federal income tax return must be filed and paid by the 15th day of the fourth month following the company’s tax year-end. Most startups have tax years ending 31st December, which means federal income taxes are due by the 15th of April.

State Income Tax

Every state in the United States has a unique tax system that, depending on the startup business’s activities in that state, requires annual filings.

State income tax is not the same as federal income tax filing. States cannot simply impose income tax on a company whenever they choose to do so.

There must first be a connection, also referred to as nexus, between the state and the company.

In many states, sales tax nexus exists when the entity has significant economic presence/activity within the state. In most cases, a physical presence is not required.

Each state has individual tax provisions that define what business activities will generate nexus for the company. These provisions might include the following:

  • Employees working for you in the state
  • Mobiles stores
  • A warehouse for inventory
  • An office where you conduct business from

If you are unsure about whether you have economic nexus in a state, it is highly advisable to speak to a professional tax professional to assess which US states might require you to file and pay state income tax.

Franchise Tax

If you own a franchise, your business might be subjected to the state’s franchise tax if your startup is conducting business or is incorporated within that state.

Some states in the United States require start-up companies to pay an annual franchise tax. Speak to a tax professional to determine whether you might be required to pay a franchise tax.

Other Taxes

Depending on the location or activities of your startup, you might be required to pay other taxes.

That’s why it’s really important to consult with a tax professional to make sure you are filing and paying all the necessary taxes for your business.

Related: Home Business Tax Tips for Stay-at-Home Moms


We hope that this article about small business startup taxes has been helpful and that it has given you the information you needed.

When it comes to the world of taxes, it is best not to seek help rather than trying to figure it out on your own. Because if you have any uncertainty, you may make costly mistakes.  Not filing the applicable tax returns and paying taxes could result in penalties and interest payable that could have been avoided.

Rather, consult with an experienced tax professional within your jurisdiction to assist you with your tax matters.

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About Lauren Kinghorn

Visionary Digital Entrepreneur ► Heart-Centred Influencer | Plant-Based Enthusiast | Speaker | Writer | Course Creator | YouTuber | Podcaster * Come join me at Wealthy Affiliate * inspiringmompreneurs.com/WA

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