Navigating the complex world of business and taxes can be daunting, especially for small business owners. Understanding key terms can help you make informed decisions and ensure compliance. Here are some essential business and tax terms every small business should know.

Business and Tax Terms Every Small Business Owner Should Understand

Here’s a helpful glossary of common business finance and tax terms that business owners might encounter.

Business Terms

• Sole Proprietorship: A business owned and operated by one person.
• Partnership: A business owned by two or more people.
• Corporation: A legal entity separate from its owners.
• LLC (Limited Liability Company): A hybrid business structure that combines elements of a corporation and a partnership.
• Profit Margin: The percentage of revenue remaining after deducting expenses.
• Cash Flow: The movement of money into and out of a business.
• Inventory: The stock of goods a business holds for sale.
• Depreciation: The allocation of the cost of an asset over its useful life.

Tax Terms

• Taxable Income: The amount of income subject to taxation.
• Tax Deductions: Expenses that you subtract from taxable income.
• Tax Credits: Amounts that you directly subtract from your tax liability.
• Estimated Taxes: Quarterly payments made by individuals and businesses to the IRS.
• Self-Employment Tax: A tax levied on individuals who earn income from self-employment.
• Payroll Taxes: Taxes withheld from employee wages and paid by employers.
• Sales Tax: A tax imposed on the sale of goods and services.
• Property Tax: A tax levied on real estate.

Additional Terms

• Bookkeeping: The process of recording financial transactions.
• Accounting: The practice of analyzing and summarizing financial information.
• Audit: A formal review of a company’s financial records to ensure accuracy and compliance.
• IRS (Internal Revenue Service): The federal agency responsible for collecting taxes.
• EIN (Employer Identification Number): A nine-digit number assigned to businesses for tax purposes.

The Bottom Line

Understanding these terms is crucial for small business owners. By being aware of the key concepts, you can make better business decisions, ensure accurate tax filings, and minimize tax liability.

Need help navigating these terms or your small business’s tax obligations? We can help you understand complex tax laws, optimize your tax strategy, and ensure compliance with IRS regulations. Our diverse range of clients, including law firms, real estate agents, Amazon DSP Owners, and even medical cannabis services, is a testament to our industry expertise. No matter your industry, contact FSL Tax and Accounting Services for expert guidance.  Call 678-702-7218 or fill out our online inquiry form.