Business Taxes in the United States: Complete IRS-Based Guide for LLCs, Corporations, Sole Proprietors, and Startups

Business taxation in the United States is governed by the IRS, and understanding your obligations is essential for compliance and financial planning. This guide outlines how different business structures are taxed, the forms required, estimated tax rules, payroll requirements, and strategies to optimize tax liability.

1. Business Structures and Taxation

The IRS classifies businesses based on their structure:

• Sole proprietorship: Income passes through to the owner (Schedule C).
• Partnership: Files Form 1065; members receive K-1s.
• LLC: Can choose pass-through taxation or corporate taxation.
• Corporation: C-Corps file Form 1120; S-Corps file Form 1120-S.

IRS Business Structures: IRS Business Structures

2. Sole Proprietor Taxes

Sole proprietors report income on Form 1040 Schedule C. They pay:

• Income tax
• Self-employment tax

IRS Schedule C: Schedule C Form 1040

3. Partnership Taxes

Partnerships file Form 1065 and issue Schedule K-1 to partners. Income passes through to members, who report it on their personal returns.

IRS Form 1065: Form 1065
Schedule K-1: Schedule K-1 Form 1065

4. LLC Taxes

LLCs have flexible taxation:

• Single-member: Disregarded entity
• Multi-member: Partnership
• Optional S-Corp or C-Corp election

IRS LLC Guide: Limited Liability Company (LLC) – IRS

5. Corporation Taxes

C-Corporations are separate taxable entities. Profits are taxed at the corporate level and again at the shareholder level on dividends.

S-Corporations allow income to pass through, avoiding double taxation.

C-Corp IRS: Corporations
S-Corp IRS: S Corporations

6. Estimated Taxes

Businesses may need to pay estimated taxes quarterly.

IRS Estimated Taxes: Estimated Taxes – IRS

7. Employment Taxes

Employers must withhold:

• Federal income tax
• Social Security & Medicare (FICA)
• Federal unemployment tax (FUTA)

Forms required:

• Form 941: IRS Form 941
• Form 940: IRS Form 940

8. Sales and Excise Taxes

Depending on the business:

• Collect state sales tax
• Pay federal excise taxes for specific products or activities

State Sales Tax Directory: TaxAdmin State Agencies

9. Deductible Business Expenses

IRS allows deductions for:

• Rent and utilities
• Employee wages
• Marketing and advertising
• Office supplies
• Travel and business meals (50% limit)

IRS Business Expenses: Deducting Business Expenses

10. Recordkeeping

Maintain proper documentation for:

• Income
• Expenses
• Payroll
• Contracts

IRS Recordkeeping: Recordkeeping – IRS

11. Filing Deadlines

• Annual returns for corporations and partnerships
• Quarterly estimated taxes
• Payroll filings

IRS Deadlines: Filing Deadlines_ IRS