How much can a small business make before paying taxes?

Contrary to popular belief, there’s no magic profit barrier where taxes suddenly materialize like angry accountants at the door. The truth is more of a sliding scale, like a croissant dipped in tax code frosting. The more you earn, the bigger the crumbly bite the taxman takes.

Here’s the gist:

  • Sole proprietors and single-member LLCs: If your net earnings (revenue minus expenses) stay below $400, you might be exempt from filing taxes altogether. Think of it as a tiny bakery selling just enough sourdough to cover rent.

  • Beyond $400: You’ll likely pay self-employment tax, a social security and Medicare contribution. Imagine it as a sprinkle of taxes on your growing batch of baguettes.

  • Federal income tax: This kicks in once your taxable income (after deductions) surpasses the standard deduction amount (around $12,400 for single filers). Think of it as the oven heating up as your profits rise.

  • State and local taxes: These vary, but add another layer to the baking process. California might add a pinch of sales tax, while Texas keeps things plain.

Remember, this is a simplified picture. The exact amount you owe depends on your business structure, location, deductions, and other factors. Consulting a tax professional is like having a master baker guide you through the perfect recipe for tax compliance.

So, the answer isn’t a number, but a reminder: focus on growing your delicious business, and let the taxman enjoy a taste when the time comes. He might even leave you a crumb of advice!