How are taxes for businesses typically calculated?

Taxes for businesses are typically calculated depending on the organizational structure because different structures—such as sole proprietorships, partnerships, corporations, and limited liability companies (LLCs)—are subject to different tax regulations. For example, a corporation is taxed separately from its owners, whereas a sole proprietorship's income is reported on the owner's personal tax return.

Variations in tax treatment arise from how income is classified and the potential for deductions or credits that vary by structure. For instance, corporations may have access to specific tax benefits unavailable to other structures, which can affect the overall tax liability. Thus, understanding the organizational structure is fundamental for accurately calculating business taxes, as it directly influences how and what is taxed.