Starting a Business - Federal / State Taxes

Starting a Business - Federal / State Taxes

Your form of business (ex: sole proprietorship, partnership, LLC, corporation) will determine which income tax return form you need to file.


Overview

Main Guide: Starting a Business.

Your form of business (ex: sole proprietorship, partnership, LLC, corporation) will determine which income tax return form you need to file. The federal government has four basic types of business taxes:

  1. Income Tax
  2. Self-employment tax
  3. Taxes for employers
  4. Excise taxes

Federal Income Tax

Select the form of your business to find out which federal tax forms you need to file:


Federal Tax Identification Number (EIN)

An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN. You may apply for an EIN in various ways, and now you may apply online with the IRS. You must check with your state to determine if you need a state number or charter.


State Taxes

Most businesses are required to pay state and local taxes, in addition to federal taxes. Each state and locality has their own tax laws. The most common type of state and local tax requirements for small businesses are income taxes and employment taxes.

Income Taxes

Almost every state has a business or corporate income tax. Your tax requirements in each state will depend on the legal structure of your business. For example, an entity registered as a Limited Liability Company (LLC) will have the entity and the owners taxed separately. In contrast, sole proprietors will report their personal and business income taxes using the same form.

Employment Taxes

Business owners with employees are also responsible for paying certain taxes, called employment taxes, to the state. All states requirement payment of workers' compensation insurance and unemployment insurance taxes.

The following states also require businesses to pay temporary disability insurance

  • California
  • Hawaii
  • New Jersey
  • New York
  • Rhode Island
  • Puerto Rico

Additional Resources: