One of the most important factors to consider when choosing a business structure is the taxation implication of each company type. There are numerous state, federal, and even municipal taxes your business may be subject to. The impact of these taxes on your company’s bottom line cannot be overstated. Read ahead for an in-depth look at various state-level taxes.
The five most widely imposed state taxes
The taxes that will be imposed on your business will vary depending on the state in which you are incorporated. These five are the most common, and are typically imposed on nearly all for profit organizations, in all 50 states.
Depending on your business structure, you may be taxed on your business’s income at either the business or individual level. If you are taxed only at the personal level for your income taxes, this is considered “pass through” taxation.
Many states impose a franchise tax on all corporations (and some partnerships). Despite the name, this is not a tax required only on businesses that use “franchising” as part of their business model or expansion plans. Instead, this is a tax that is levied on every company operating within the state.
While a major share of all property taxes are collected to fund federal initiatives, a substantial percentage of these taxes are used for state-level projects. Keep in mind that property taxes do not just apply to land or buildings, but often any other notable physical assets your company might own.
Use taxes are collected on certain services or rentals that your business supplies to its customers. These taxes are very similar to sales taxes, but they are not applied to physical goods. The taxes are collected directly from customers or clients, and then are paid back to the state at a later date.
Sales taxes are imposed on nearly all transactions that involve physical goods. They are collected directly by your business, and are paid by both the provider and end-level consumer.
Whenever you have any questions regarding taxation, or about your ideal business structure, it is always in your best interest to contact any relevant business professionals. During the initial filing process, this could include a professional outside registered agent, or other dedicated filing professional, as well as a licensed accountant. While these services may require an initial investment, they very often pay for themselves sooner than later, and help protect you from any fines or penalties for operating illegally.
Swyft can help!
If you’d like more info on taxation and how it may impact your business, don’t hesitate to contact the experienced business professionals at Swyft.We’re here to help your business succeed!