What Percentage Does a Small Business Pay in Taxes

Determine Business Income: Calculate your total business income by adding all revenue from sales, services, and other sources.

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Subtract Deductions: Deduct business expenses such as rent, supplies, wages, and utilities from your total income to get your net income.

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Apply Tax Deductions: Use applicable tax deductions like the Qualified Business Income (QBI) deduction, which allows up to a 20% deduction for eligible businesses.

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Determine Taxable Income: After applying all deductions, the remaining amount is your taxable income.

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Use Tax Bracket: Apply the appropriate federal tax bracket (10% to 37%) to your taxable income. If your business is a C-Corp, the flat tax rate is 21%.

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Self-Employment Tax: Sole proprietors and LLC owners must also pay self-employment tax (15.3%) on their net earnings.

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State and Local Taxes: Calculate state and local taxes, which vary depending on where your business operates.

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Estimate Quarterly Taxes: If required, calculate and pay estimated quarterly taxes to avoid penalties.

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