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Which taxes does a startup actually have to pay?

TaxComplianceCosts

Every business owes federal income tax, reported on a form set by its entity type. A business with employees owes payroll taxes. Every company owes what its formation state charges for the charter, which for a Delaware company is the franchise tax, plus income tax where it actually operates. Sales tax arrives once you sell enough into a state. And payments to contractors are reported to the IRS.

Federal income tax, by entity

A C corporation files Form 1120 and pays tax on its own profit, by April 15 for a calendar-year company, and the return is required whether or not there was any income. An S corporation files Form 1120-S and a partnership files Form 1065, both by March 15 on a calendar year; neither pays tax itself, and each owner pays on a Schedule K-1. A multi-member LLC is a partnership by default. A single-member LLC is disregarded, so its numbers go on the owner's Form 1040, usually Schedule C. A corporation expecting to owe $500 or more, or an individual expecting to owe $1,000 or more, pays estimated tax during the year or is penalized.

Once you have employees

Payroll brings federal income tax withholding, Social Security and Medicare taxes, and federal unemployment tax. Deposits are electronic, monthly or semiweekly, reported quarterly on Form 941 and annually on Form 940 for unemployment tax; late deposits are penalized at 2 to 15 percent. Payments to a contractor of $2,000 or more during 2026 go on Form 1099-NEC by January 31; payments to a corporation are generally exempt, except for legal services.

State taxes

Delaware's franchise tax and annual report for corporations are due March 1, and its $400 annual tax for LLCs is due June 1. States where you have an office or staff tax income too, and most now make out-of-state sellers collect sales tax once sales into the state pass a threshold; California's is $500,000 a year.

Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.