University of Maryland Extension

Income taxes for for-profit businesses

Author: 
Nicole Cook, B.S., J.D., LL.M., Environmental and Agricultural, Faculty Legal Specialist, Agriculture Law Education Initiative (ALEI), University of Maryland Eastern Shore

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An owner of an LLC pays taxes just as a sole proprietor does: all profit is considered personal income and taxed accordingly at the end of the year. Generally, a business owner will want to avoid double taxation in the early stages. The LLC structure prevents that, and makes sure you're not taxed as a company and then again as an individual.

Individuals in a partnership also claim their share of the profits as personal income. Your accountant may suggest quarterly or biannual advance payments to minimize the end effect on your return.

A corporation files its own tax returns each year, paying taxes on profits after expenses, including payroll. If you pay yourself from the corporation, you will pay personal taxes, such as for Social Security and Medicare, on your personal return for what you were paid throughout the year.

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Taxes for not-for-profit organizations

 

 

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