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Business vs. Personal Taxes: What You Need to Know #shorts

17 Sept 2024 · 1 min

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A short YouTube video by Bob Gauvreau explaining key differences between business and personal taxes: corporations are separate legal entities that must file and pay taxes on business income; sole proprietors and partners report business income on their personal tax returns. Wages paid by a business are deductible by the business and taxable to the individual; dividend payments are not deductible by the corporation and are distributed after the corporation pays tax, with recipients owing tax on dividends.

Chapters

The difference between business taxes and personal taxes. You have a business that is a corporation. They are a separate legal entity and they have a separate requirement to file taxes on their own behalf. You, as an individual are required to pay taxes and file and submit taxes if you owe money to the government at the end of the year. If you are a sole proprietor or a partner, the only taxes you need to file are on your personal tax return. Any proprietor or partnership income, it's filed and included on there. As a business, you pay tax on your business income. In your business income, you have expenses such as payroll or wages to yourself. If that's the case, the business gets a deduction for that. If we're doing it that way, you've got to claim the wage on your personal tax return and pay tax on that wage. If your business doesn't pay a wage when it pays you as a shareholder, as a dividend, the business does not get a deduction for that. It does have to file its taxes. Pays tax before dividend distributions. If you're claiming that dividend distribution, you do have to pay tax on that. Over here. As an individual.