Beginner’s Guide to Business Taxes for Entrepreneurs

What Changes When You Make Money Outside a W-2

If you made money outside of a traditional W-2 job this year — through a business, freelancing, consulting, side hustles, or contract work — your taxes are not the same.

That doesn’t mean you did something wrong.

It just means different rules apply.

This guide is designed to walk you through the basics of business taxes in clear, practical language so you understand what’s required, what’s optional, and where most entrepreneurs get tripped up.

No shame. No jargon. Just clarity.

Personal Taxes vs. Business Taxes: The First Thing to Understand

Most people grow up only knowing W-2 taxes.

With a W-2:

• Taxes are withheld automatically

• Your employer reports income for you

• You file once a year

• Refunds are common

  
  

Business income works differently.

When you earn money as an entrepreneur, freelancer, or business owner:

• You are responsible for tracking income

• You are responsible for tracking expenses

• You may need to pay taxes quarterly

• You may file business tax forms in addition to your personal return

  
  

The government treats you as both the worker and the employer.

That’s the shift most new entrepreneurs don’t realize at first.

What Counts as “Business Income”?

Business income includes any money earned outside a W-2, such as:

• Freelance or consulting income

• Side hustle income

• Contract or gig work

• Online sales or e-commerce

• Service-based businesses

• Content creation, coaching, or digital products

• Rental or investment activities (in some cases)

Even if:

• You didn’t form an LLC

• You weren’t “official” yet

• It was part-time

• You didn’t receive a tax form

  
  

If you earned it, it’s income.

Most of this income is reported to the Internal Revenue Service through:

• 1099-NEC forms

• Payment processors (Stripe, PayPal, Square, etc.)

• Bank reporting

• Platform reporting

The Most Common Business Tax Structures (Simplified)

You don’t need to memorize this, but you should recognize where you fit.

Sole Proprietor / Single-Member LLC

• Most common starting point

• Business income is reported on your personal return

• You pay income tax and self-employment tax

• No separation between you and the business for tax purposes

  
  

Partnership

• Two or more owners

• Business files its own return

• Profits pass through to owners

• Owners pay taxes on their share

  
  

S-Corporation

• Separate tax filing

• Owners pay themselves a salary

• Remaining profit may be taxed differently

• Often used to reduce self-employment taxes (when appropriate)

  
  

Choosing the right structure affects how much tax you pay — but structure decisions should be made strategically, not automatically.

Why Business Owners Pay Quarterly Taxes

Unlike W-2 employees, business owners usually don’t have taxes withheld automatically.

Instead, you’re expected to:

• Estimate your income

• Estimate your tax liability

• Pay taxes throughout the year

  
  

These are called quarterly estimated tax payments.

Skipping them doesn’t always cause immediate problems — but it often leads to:

• Penalties

• Interest

• Larger balances due at filing time

• Stress you didn’t need

  
  

Quarterly payments are one of the biggest mindset shifts for new entrepreneurs.

Business Deductions: The Part Everyone Hears About

(But Misunderstands)

Yes, business owners can deduct expenses.

No, not everything is a write-off.

A business expense must be:

• Ordinary (common for your industry)

• Necessary (helpful to your business)

  
  

Common beginner deductions include:

• Supplies and materials

• Marketing and advertising

• Software and subscriptions

• Business travel and meals

• Home office expenses (when done correctly)

• Vehicle and mileage (with proper records)

  
  

The key is documentation.

Deductions without proof don’t hold up.

The #1 Mistake New Entrepreneurs Make

Waiting until tax season to think about taxes.

By then:

• The money is already spent

• The mistakes already happened

• The options are limited

  
  

Taxes are easiest when they’re managed throughout the year, not just filed once.

That’s why bookkeeping, strategy, and structure matter just as much as the return itself.

What You Should Do Right Now If This Is Your First Time

If you’re new to business taxes, start here:

1. Separate business and personal finances

2. Track all income and expenses

3. Save a portion of income for taxes

4. Understand your filing deadline

5. Get clarity before filing, not after

   
   

You don’t need to know everything.

You just need the right starting point.

Download: Tax Season Checklist for Entrepreneurs

To make this easier, we’ve created a Tax Season Checklist for Entrepreneurs that walks you through exactly what to gather, review, and prepare before filing.

This checklist is designed for:

• First-time business owners

• Freelancers and contractors

• Side hustlers and growing entrepreneurs

• Anyone who earned income outside a W-2

  
  

👉 Download the checklist and get clear on your next steps.

(Email required. No spam. Just useful guidance.)

Want Personalized Help Instead of Guessing?

If you want someone to walk through this with you, answer your specific questions, and help you apply this to your actual numbers, you can book a Tax Strategy Session.

During this session, we’ll review your situation, break down what applies to you, and outline a clear plan for navigating this tax season with confidence. No judgment. No overwhelm. Just clarity and direction.

The session is $99, and if you move forward with services, that fee is applied toward your work with us.

👉 Book a Tax Strategy Session and stop guessing about your business taxes.

Final Thought

Business taxes don’t have to feel confusing, intimidating, or overwhelming.

They only feel that way when you’re trying to figure them out alone.

Understanding the basics is the first step toward taking control — and building a system that actually works for you.