Well, first and foremost, we live in a community with others. So, some responsibilities are shared among the community - schools and libraries, local infrastructure, Medicare and Medicaid, etc. Taxes are a system our federal, state, and local governments use to collect funds for communal benefits fairly. Now, do our federal, state, and local governments use that money correctly? Do you think the tax system is fair? Those are different questions altogether!

Without question, your responsibilities increase when you decide to start and run a business. Understanding why those responsibilities exist and how to manage them best is foundational to sustainable and profitable entrepreneurship.

Okay, so what’s the system?

Taxes are collected in various ways, connected to different types of income or assets that individuals or businesses may have. It is important to be aware of your responsibilities regarding these taxes, including but not limited to the following,

• Sales taxes
• Property taxes
• Income taxes
• Employment taxes
• Self-employment taxes

All types of taxes - federal income tax, self-employment tax, state and local taxes, and others like franchise or excise taxes - contribute to your overall tax liability.

What is Tax Liability?

Your tax liability is the total amount of taxes you owe to federal, state, and local governments. It includes federal income tax, self-employment tax, and state or local taxes tied to your earnings and/or business activities.

For entrepreneurs, managing tax liability is more complex than for W-2 employees. Business profits, personal income, and your business's legal structure all play a role in determining how much you owe. Unlike employees whose taxes are automatically withheld, entrepreneurs are responsible for calculating and paying their taxes throughout the year.

Taxes aren’t just a financial responsibility - they’re an investment in the systems that support individuals and businesses alike. For entrepreneurs, staying on top of your tax liability is essential for:

• Maintaining compliance: Avoid penalties and interest by meeting deadlines and making accurate payments.
• Improving cash flow: Estimating your liability allows you to set aside funds for taxes, reducing financial stress.
• Strategic growth: When you understand your taxes, you can implement strategies to minimize liabilities and reinvest in your business.

Empower Your Success Through Tax Planning

Your tax liability reflects the success of your entrepreneurial journey. Proactively managing it ensures that your hard work benefits both your business and your community. If you’re ready to make taxes less overwhelming and more strategic, we can help.

If you need accounting and tax help for yourself or your business, we’ve got you covered. Thanks to our strategic alliance with Carson Creative Solutions, led by accounting and tax pro Asia Hill, we’ve built the Tax Ready by Design™ program to help creatives stay compliant and financially sound.

Need guidance? Reach out, and let’s talk.