Effective Tax Rates for Small Businesses by Entity Type

The graphs below were created using Google’s graph tool.

The vertical bar graphs show the effective tax rate for small businesses by the entity type of the small business (sole proprietorship – nonfarm; partnership; S corporation; and C corporation).

Details behind the percentages are in a 2009 study done by Quantria Strategies, LLC for the US Small Business Administration. The study can be read by clicking here (PDF file). The study defines a small business as a business having less than $10,000,000 in gross revenues.

A separate graph is presented for C corporations because the effective tax rate for C corporations should not be compared to the effective tax rates for the other business entities. The reasons for this is that the C corporation tax rate does not include income taxes that owners pay on the salaries they receive from the corporation and the effective tax rate does not include taxes on dividends that owners receive from the corporation.