Tax Basics for Small Business Owners

How a business is taxed depends heavily on its legal structure, which is one of the reasons the choice between an LLC, an S-corp, and other structures isn't just a liability question — it's a tax question too. Getting the structure and the ongoing compliance right from the start avoids a lot of expensive cleanup later.

Pass-through taxation vs. corporate tax

Sole proprietorships, partnerships, and most LLCs are "pass-through" entities — the business itself doesn't pay income tax; profit passes through to the owners' personal returns. A traditional C-corporation pays its own corporate income tax, and then shareholders pay tax again on dividends, which is the often-cited "double taxation" issue. Electing S-corporation tax treatment for an eligible LLC or corporation is a common middle path that keeps pass-through treatment while allowing some payroll tax savings.

Estimated taxes and payroll obligations

Business owners generally have to pay estimated tax quarterly rather than waiting until year-end, since there's no employer withholding it automatically the way a paycheck does. If the business has employees, it takes on payroll tax obligations — withholding, matching Social Security and Medicare contributions, and Florida's reemployment tax — with strict deposit deadlines that carry serious penalties if missed.

Florida-specific considerations

Florida has no state income tax for individuals, but corporations doing business in the state generally owe Florida corporate income tax, and most businesses selling taxable goods or services must collect and remit sales tax. Sales tax compliance is one of the most common audit triggers for small businesses, especially around what's taxable, what's exempt, and whether tax was collected correctly across different counties, which can have different local surtax rates.