What taxes do small businesses pay?
The answer depends on what country or region you are in, plus the type of business you have!
No matter where you are, you have to pay taxes to someone. There are three types of taxes that most small business owners will have to pay:
- Sales Tax
- Payroll Tax
- Corporate Tax
Systems Business Coach’s head office is in British Columbia, Canada (Although we operate worldwide) therefore, a lot of our examples will be Canadian-based.
Always double-check with your government to see what other taxes and regulations are in place for your business type.
Depending on where you live, you may have up to three different levels of government to pay sales tax to. In Canada, we have provincial taxes and federal taxes. In some parts of the world, there are also regional taxes that small business owners must collect, report and pay on their sales.
Do you have a system in place to pay your sales taxes?
Small business owners with employees need to pay special attention to the management of these taxes. Due dates for payment to the government are strict, with big penalties and fines for late payments. In fact in Canada, if you miss more than two payments and the federal government will freeze your business bank account. This is one tax payment you don’t want to miss.
These payments include income tax, pension and unemployment contributions. I recommend filling out all forms at the start of employment and keeping accurate records of communication between you and your employees regarding their tax amounts. Payroll taxes are unique to the individual employee.
Even if you don’t have employees, you may have to pay payroll taxes, on the money you take out of the company to pay yourself.
Payroll tax in Canada is called employer remittance. Double-check what it’s called in your country!
Corporate taxes are measured yearly, typically three months after the company’s year-end. Your accountant will work with you to determine the accuracy of your books and generally, they are the ones that submit your corporate tax return to the government. If you made a profit, expect to pay corporate taxes.
Do you have an accountant to help with your corporate tax return?
Remember, paying tax is a good thing, it means you are doing well! (Which is much better than the alternative!)
Until next time, enjoy your Entrepreneurial Journey!