Most states tax at least some types of business income derived from that state.  As a rule, the details of how income from a specific business is taxed depends in part on the business's legal form.

While most businesses have the same format at the state and federal level, it may be to your advantage to be taxed differently at the federal level than at the state level.

I have decided to discuss S Corporations last because they are a hybrid entity.  Unlike a partnership, individual shareholders are not liable for the debts of the corporation, nor can they be sued in their personal capacity for the corporation's or its employees actions.

Is is not my intention in this module to teach you how to do a corporate return.   What I do want to point out are all of the things you need to know to make good decisions running your business and protect your profits from overpaying corporate taxes.

Although S Corporations and Partnerships are both passthrough entities, partnerships have the unique availability of special allocations to their partners.  This is good to know when deciding which legal format is best for you.

There are three basic reasons why you need to know how basis works: buying or selling equipment and property, determining how to take depreciation to your advantage, and determining the value of your investment in a partnership or S Corporation.

One of the best deductions that you can take for your small business if you have vehicle expenses is the mileage deduction.  There are two ways that you can deduct mileage and the documentation you must keep.

Sole proprietorships do not have to file a separate income tax form from their personal return.  They simply fill out a Schedule C and/or Schedule SE and attach it to their personal return.

In our third pillar of building a solid business foundation, we are going to combine what you have learned so far to see how they affect the amount you have to pay to the taxing authorities.  Even if you decide to hire someone to do your taxes.