Understanding corporate taxes in the US is essential for any US small business owner. Tax obligations vary depending on your business structure—C corporation or pass-through entity—and your state of operation. Knowing how these rules work helps you stay compliant, plan effectively, and avoid costly mistakes.
With the right approach, small business owners can focus on growth while managing their federal and state tax responsibilities confidently.
Businesses structured as C corporations pay federal corporate income tax:
The federal corporate tax rate is 21% on taxable income.
This rate has been in effect since 2018 and remains unchanged under the One Big Beautiful Bill Act of 2025.
C corporations file separate corporate tax returns and pay taxes directly at the corporate level.
C corporations are often chosen by businesses that plan to reinvest profits or issue multiple classes of stock.
Many US small businesses operate as pass-through entities, including:
Sole proprietorships
Partnerships
S corporations
Limited liability companies (LLCs)
Key points for pass-through entities:
Business income flows through to the owners’ personal tax returns.
Owners pay personal income tax rates, ranging from 10% to 37% depending on income.
Pass-through entities avoid federal corporate income tax, simplifying filings and reducing the risk of double taxation.
This structure is particularly common among small businesses and startups.
✅ Why juggle payroll and accounting? Get both services under one roof with real-time sync. Explore our solution here.
State tax rules vary and may impact corporate taxes in the US:
Some states impose corporate income taxes, typically ranging from 1% to 12%.
States such as South Dakota and Wyoming do not levy corporate taxes.
C corporations may pay both federal and state corporate taxes, while pass-through entity owners typically only face state-level taxes on their personal income.
Understanding your state’s tax rules is critical for accurate planning and compliance.
Professional accounting services make managing corporate taxes in the US much easier for US small businesses:
Accurate Tax Calculations: Ensure taxes are calculated correctly for federal and state obligations.
Compliance Support: Stay updated on federal and state tax changes, including 2025 updates.
Tax Planning Strategies: Optimize business structure and deductions to minimize tax liability.
Record Keeping: Maintain organized records to simplify filing and potential audits.
Peace of Mind: Reduce stress by relying on expert guidance to manage compliance efficiently.
Understanding corporate taxes in the US is essential for any US small business. C corporations pay federal corporate tax at 21% and may also be subject to state corporate taxes. Most pass-through entities avoid federal corporate taxes, with income taxed on the owners’ personal returns instead. State corporate tax rates vary, so it’s important to consider both federal and state rules.
 Focus on growing your business while our in-house team manages your payroll. From payment processing to tax compliance, we handle everything under one roof. Get accurate payments, timely tax deposits, and perfect records that sync automatically with your accounting.
Experience payroll management that just works.
Ready to get started? Chat with us now, email [email protected], or use our contact form.
Call