View Full Version : Do I have to pay taxes on a business that's not making money?

01-14-2014, 01:30 PM
I have had my business for several years now and want to start a new business. I have a great idea for a name and want to get it incorporated so no one else takes the name. I'm concerned that if I incorporate the name will I have to start reporting it at the end of the year even though it is not actually making money yet. I wondering if it will cost me more money than I am actually making since I don't plan on starting the business for another year or so. I just don't want anyone to take the name. I never dealt with this type of issue since my first business I immediately started working and making money.

Any help is appreciate.


01-19-2014, 12:20 AM
I think you have to file the tax but I don't think you have to pay additional tax because you're not making any money. One thing though, you can file the loss on the tax form because you are losing money rather than earning it. If you know you're not making money after a period of time, then you should claim loss on the tax, but you should talk to your accountant about this to make sure.

01-20-2014, 02:19 PM
It would be best to file the taxes anyways. I don't think that the government will charge you any money since you have no profits. You should go to irs.gov and talk with customer support for more detailed answers.

01-20-2014, 03:55 PM
The key word in the phrase "Income Tax", is "Income". :) So if you are not generating revenue, you will not be paying tax. You will however be entitled to claim deductions for your startup costs.

01-20-2014, 09:25 PM
Short answer, no, you don't have to pay taxes, however, you still need to report it to the IRS, and if needed, to your State. If you decide to incorporate, it's a whole new ball game. First, you'll need to file the necessary documents to make your corporation official. In general, those will be at the State and Federal (i.e., IRS) levels. Once you have created your corporation, you'll need to file two separate tax returns, one on the 1040 (personal tax) and another, for your company (e.g., 1120S, if your company is considered an S-Corp). If you hire an accountant to do your taxes, expect to pay around $700 - $750 just for filing an S-Corp tax return. And depending on your State's policy regarding corporations, you may need to file an annual report and pay a fee. So, even if you report a loss or zero income, incorporating will sill cost you some money.

01-20-2014, 09:44 PM
It sounds like you are starting the corp just to protect the name (in the short term). Have you considered trademarking the name, instead of opening a corporation?

01-22-2014, 07:51 AM
It's still best to indeed file and declare it and they will see anyway how much it's making. If it's not making any money at all, then there's no reason that they would tax you as far as I know.The tax payment would depend on how much your business is making. So if it's not making anything, there's your calculation. But you have reconfirm it to your state rules. It varies per state.

01-22-2014, 08:06 AM
File it, that way you won't be running into any trouble later. Most likely you won't have to pay anything due to not making a profit.

01-26-2014, 03:09 PM
Business that don't have income or turnover usually don't have to pay anything. This is how it works in countries where the progressive income tax is applied. Where I live, in Albania, businesses with a total turnover of less than 2000 euros per year also pay no tax.

01-27-2014, 12:20 AM
It is logical to think that if you don't have any income at all (break-even or a net loss), then no tax should be paid. Also, the net loss could be carried forward or carried back in order to help the business recover from the losses. Still, you have to file a return so that the IRS would know what's happening to your business and so that you could claim a net operating loss carry over (or carry back) later on.

But, you know what? In my place, even if a corporation experiences a net loss, there's still a tax to be paid. Rip-off!

02-03-2014, 09:11 AM
I would agree with what most of the other people in here said. I don't think that you will have to pay anything for taxes. You probably should file them though. It's good to just get in the habit of doing it, that way when you do have income you know exactly what to do and it wastes less time. Tax payments on business sounds like a pretty big pain.

02-11-2014, 08:05 AM
I own a seasonal business, so seasonal that we completely close for at least 4 months out of the year. I have had issues with filing income and them filing no income but it was resolved fairly easily and at no cost to me.
Make sure you at least report every quarter or whatever works best for you. If you aren't generating any income or collecting sales tax you don't have to pay anything.

03-12-2014, 03:06 PM
I agree with people that say even if you aren't making money at your business, the best advice is to file anyway. The numbers will show you aren't making money, or even losing money, and your tax information will be updated and adjusted accordingly. I'm thinking you get taxed based on your income, and if a business doesn't have any income, or very little, how can the government tax that?

03-22-2014, 03:57 AM
It is still a requirement that you file for the tax. But it's not necessary that you pay for something that you are not getting your earnings from. What is there to pay when there is no money in the business anyway, right?

03-22-2014, 08:16 AM
I don't think you have to pay any taxes if you're not acquiring income. It's in the government and country's best interest for new businesses to thrive, and taxing non profiting businesses is contradictory to this goal. You may still have to file your income statements, but I would guess that would be the only requirement if you do not incur profits, because this way you are just being transparent for them to be able to keep track of your progress and they will gain more by you being successful in the future so it's not the best move to give you even more expenses when you are barely getting any profits.

Linda A Perez
06-03-2014, 03:51 AM
Big or small business,it's better to file for tax .A good tax consultant (http://www.kpmg.com/ca/en/services/tax/pages/default.aspx)will be able to guide you and claim your returns.

07-09-2014, 12:53 PM
Hi Al,

I'm not a tax consultant, lawyer, or anything of that nature...

I've just been educating myself through research.

Will it be a home based business?

If so, let Uncle Sam pay for it.

What I mean is that, even if you're just reserving your business name for now, if you set it up as a HBB, you will immediately qualify for tax breaks, that congress has established for home based business owners.

Just work it for at least 3-4 hours a week, total, while keeping good records, and intend to make a profit, even if you don't make any money. There's no min. or max to how long you can claim a loss, before you have to be in profit, as long as you have the intent to make a profit.

As a matter of fact, as a HBB owner, most people can have $400 or so, less withheld from their monthly salary for taxes..(certain form to fill out with employer) So, now there's extra take home pay every month, you've created, by just shifting the paradigm to being a HBB owner.

By claiming, your legally allowed by Congress, tax breaks, for operating a home business, Uncle Sam is paying you, not the other way around.

Best Of Success In Your Endeavors

Shay C.

07-28-2014, 09:09 AM
Each state has a different set of rules. Some will allow you to reserve your name for a set amount of time and a small fee. Additionally, some states have a minimum tax requirement for all formed businesses whether you are profitable or not. Check with your local state Dept of Revenue. They should also have a hotline where you can ask questions about specifics. On a federal level you will not have to pay taxes if you aren't creating income.

Allan Madan
01-08-2015, 01:30 PM
Although, your corporation is not making any profit, it is required to file your corporate taxes yearly.
Please refer to http://http://madanca.com/services/corporate-and-business-tax/corporate-tax-return-preparation/ to understand the tax filing requirements as a corporation.

Madan Chartered Accountant

03-23-2018, 07:28 PM
Lol great answer, simple and well put

03-24-2018, 07:28 AM
hi everyone