There are so many similarities between small business owners and those that are self-employed that many people confuse the two with one another. However similar they may be, it is important that you know the difference between the two because they are certainly two different things in the eyes of the IRS. Mark Dicus & Company is here to talk about what the differences are between small business owners and those that are self-employed.
What Qualifies a Person as Self-Employed?
When you are self-employed, you aren’t relying on any other employees to get the job done. You are the entirety of the business. It is up to you to get all of the work done and to make money. Sometimes, you may have a partner that you work with to get the work done, but beyond that, it is all up to you.
What Does Being a Small Business Owner Mean?
Someone that is a small business owner is someone that has other employees and runs the business rather than being the entire business on their own. Sometimes small business owners actually hire those that are self-employed as independent contractors to do work for them. Small business owners are able to classify their business as a separate entity and will have less liability as a result of that.
How Taxes Are Handled Differently Between Small Business Owners & Those Self-Employed?
The biggest difference between those that are self-employed and those that own a small business is in how they are paid and how they pay taxes.
– Self-Employed: If you have any business deductions, losses and profits, they are all going to be reported on your personal taxes. You will be responsible for paying your own self-employment tax, Medicare tax and social security contributions. Many of those that are self-employed pay quarterly taxes so that they can avoid large tax bills at the end of the year.
– Small Business Owners: There are different types of small businesses. For instance, if you are limited liability company (LLC), you can either be taxes as a corporation or taxes can be passed through the owners. You will need to use W-2 Forms for your employees, and if you use independent contractors, you will need to report any payments over $600 using Form 1099-MISC or Form 1099-NEC. When you choose to be taxed as a corporation, you will pay corporate taxes. This means that you will pay taxes on the profits you see.
Tax Filing, Bookkeepers, Accountants & More in Summerlin, North LV, Henderson, Lone Mountain Village & Greater Las Vegas, Nevada
At Mark Dicus & Company, we know it can be tough to be both self-employed or a small business owner. If you are in need of any advising or accounting services, there is no one that will do a better job that the professionals in our office. We have the experience and expertise to help you navigate taxes and bookkeeping questions so that you are successful as possible. Call us today!