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What a Student Entrepreneur Should Know About Employment Tax
Business Size and Employment Tax
​Regarding how employment tax work for each type of business, you must first consider the type of business each firm is participating in. There are 3 basic categories that firms can be divided into.
Self-employed individuals, or sole proprietorships, only pay employment taxes for one individual. The cost of this tax is relatively low compared to the cost for larger firms. However, something else to consider as a self-employed individual is that you have to pay for both sides of the income tax, as you are responsible for the employer side and the employee side. Essentially, you would be taxed 15.3% because you're paying both sides of the tax.
Firms that are considered to be “standard small businesses” have between 2 to 500 employees on the payroll, according to businessnewsdaily.com. This number of employees substantially raises the cost of employment taxes a firm must pay.
Firms that are considered “big business” have more than 500 employees on the payroll. The cost of this tax could be millions depending on the firm and the industry.