Starting a business comes with a long list of decisions.

What should you name it?

Do you need an LLC?

How should you accept payments?

What expenses should you track?

Do you need business insurance?

And then there’s the question that often gets pushed aside until later:

How are the taxes going to work?

When you’re an employee, your employer handles much of the tax process for you. Taxes are withheld from your paycheck, payroll taxes happen behind the scenes, and you receive a W-2 after the year ends.

Owning a business can be very different.

You may be responsible for tracking income, documenting expenses, making estimated tax payments, paying self-employment taxes, choosing a business structure, and meeting federal and Wisconsin filing requirements.

If you’ve recently started a business in Wisconsin, here are some of the most important tax concepts to understand.

1. Understand That an LLC Is Not a Tax Classification

This is one of the most common areas of confusion for new business owners.

You form an LLC and naturally assume:

“My business is taxed as an LLC.”

Not exactly.

An LLC is a legal structure, while your federal tax treatment depends on how the business is classified for tax purposes.

For example, depending on the circumstances and elections made, an LLC could potentially be taxed as:

• A disregarded entity
• A partnership
• An S corporation
• A C corporation

A single-member LLC is commonly disregarded for federal income-tax purposes unless another tax election is made.

In that situation, business activity may generally be reported on the owner’s individual tax return.

So forming an LLC doesn’t automatically create a separate federal income-tax system.

2. Understand the Difference Between Revenue and Profit

Suppose your business receives:

$100,000 from customers.

That doesn’t necessarily mean you’re taxed as though you earned $100,000 of business profit.

If you had $30,000 of legitimate deductible business expenses, you might have approximately:

$100,000 revenue − $30,000 expenses = $70,000 business profit

It’s generally the profit, rather than gross revenue alone, that becomes particularly important for income-tax purposes.

This is why accurate bookkeeping matters.

If legitimate business expenses aren’t recorded, your records can make your business appear more profitable than it actually was.

3. Set Up Separate Business Finances

One of the best habits a new business owner can establish is keeping business and personal finances separate.

Consider having a dedicated:

• Business checking account
• Business savings account
• Business credit card

Then use those accounts consistently for business activity.

Imagine reviewing 12 months of transactions and seeing:

• Client payments
• Groceries
• Software subscriptions
• Dinner with friends
• Business equipment
• Mortgage payments
• Advertising
• Gas
• Personal Amazon purchases

Now you have to determine what was business and what wasn’t.

That’s inefficient and creates unnecessary opportunities for mistakes.

Clean books begin with clean financial habits.

4. Start Bookkeeping Immediately

Don’t wait until February to reconstruct an entire year of business activity.

Your bookkeeping should generally track:

Income

How much did the business receive?

Expenses

What did you spend to operate the business?

Assets

Did you purchase equipment or other significant business property?

Owner Transactions

Did you contribute money to the business or take money out?

Payroll

If applicable, were wages and payroll taxes properly recorded?

Estimated Tax Payments

How much did you personally pay toward federal and Wisconsin taxes?

Good bookkeeping isn’t only about making tax preparation easier.

It helps you understand whether the business is actually making money.

5. Know Which Business Expenses May Be Deductible

A legitimate business expense may potentially reduce taxable business income when it meets applicable tax requirements.

Depending on the business, common expenses might include:

• Advertising
• Software
• Website costs
• Office supplies
• Professional services
• Business insurance
• Education
• Business travel
• Business meals
• Equipment
• Employee wages
• Contract labor
• Business use of a vehicle
• Business use of a home
• Phone and internet costs

But having a business doesn’t turn personal expenses into business deductions.

The expense needs to satisfy the applicable tax rules.

Related: 10 Tax Deductions Wisconsin Small-Business Owners Commonly Miss

6. Track Mileage From Day One

If you drive for business, create a system for tracking mileage immediately.

Trying to recreate an entire year’s business driving from memory is difficult.

Depending on your circumstances, business driving could include trips to:

• Client meetings
• Customer locations
• Vendors
• Business-related events
• Temporary work locations
• Other qualifying business destinations

Commuting and business mileage aren’t necessarily treated the same way.

Keep contemporaneous records showing details such as the date, destination, business purpose, and mileage when applicable.

Whether you use an app or a written mileage log matters less than actually keeping the records.

7. Understand Self-Employment Tax

This can be one of the biggest surprises for new business owners.

When you’re an employee, Social Security and Medicare taxes are generally split between you and your employer.

When you’re self-employed, you may effectively be responsible for both sides through self-employment tax, subject to applicable rules.

The commonly referenced self-employment tax rate is 15.3% on applicable net self-employment earnings, although the actual calculation includes additional rules and limitations.

And that’s separate from your potential:

• Federal income tax
• Wisconsin income tax

This is why setting aside only 10% of your business profit can leave some owners significantly short.

Related: Self-Employed in Wisconsin? Here’s How Much You Should Set Aside for Taxes

8. Don’t Assume Taxes Will Automatically Be Taken Out

A customer pays you:

$5,000.

You may receive the entire $5,000.

That doesn’t mean the entire amount is available to spend.

Unlike a traditional paycheck, nobody may be withholding taxes for you.

That’s why many business owners create a separate tax savings account.

As money comes into the business, a portion can be transferred into savings for future tax payments.

The appropriate amount varies based on your complete tax situation, so don’t assume one percentage works for every business owner.

9. Learn How Estimated Taxes Work

Federal and Wisconsin income taxes generally operate on a pay-as-you-go basis.

If sufficient taxes aren’t being withheld from other income, business owners may need to make estimated tax payments during the year.

These payments can cover taxes associated with business income rather than waiting to pay everything when the return is filed.

The amount you should pay can depend on:

• Business profit
• Other household income
• Spouse’s income
• Tax withholding
• Credits
• Deductions
• Prior-year tax liability
• Current-year projections

That’s why copying someone else’s estimated payment—or blindly repeating last year’s—can be a poor strategy when your income changes.

10. Don’t Forget Wisconsin Taxes

Federal taxes tend to receive most of the attention.

But Wisconsin business owners also need to consider state tax obligations.

Depending on your business and tax structure, that could involve issues such as:

• Wisconsin individual income tax
• Estimated income-tax payments
• Business entity filings
• Employer withholding
• Sales and use tax
• Other state requirements

The requirements depend heavily on what your business does and how it’s structured.

Don’t assume completing your federal return takes care of everything.

11. Determine Whether You Need to Collect Sales Tax

Not every Wisconsin business needs to collect sales tax.

But some do.

Whether sales tax applies can depend on the products or services you’re selling and where the transaction occurs.

If your business makes taxable sales, you may have registration, collection, reporting, and payment responsibilities.

This is something to determine when you start the business, not after you’ve been operating for two years.

Sales tax collected from customers also isn’t simply additional business income to spend.

You’re generally collecting it for the taxing authority.

12. Understand Independent Contractors vs. Employees

Hiring your first person is a major milestone.

But don’t automatically classify someone as an independent contractor simply because it’s easier than running payroll.

Employee and independent-contractor classifications depend on the actual working relationship and applicable rules.

Misclassification can potentially create problems involving:

• Payroll taxes
• Tax withholding
• Information reporting
• Unemployment
• Workers’ compensation
• Other employment obligations

If you’re hiring help, establish the proper classification before payments begin.

13. Understand 1099 Reporting

Businesses sometimes need to provide information returns for certain payments made during the year.

That can include payments to qualifying independent contractors and other vendors, depending on the circumstances.

Don’t wait until January to discover you never collected the information necessary to prepare the forms.

One good practice is obtaining the appropriate Form W-9 from applicable vendors before or around the time you begin paying them.

Then you’re not chasing someone months later when a filing deadline is approaching.

14. Know How Paying Yourself Works

New owners often ask:

“How much salary should I pay myself?”

The answer depends partly on how your business is taxed.

A sole proprietor generally doesn’t put themselves on payroll simply to take money from the business.

An owner of an S corporation who performs services for the company, on the other hand, can face reasonable compensation requirements.

That’s one reason you shouldn’t copy another business owner’s setup.

Two businesses can both be LLCs but have very different tax structures and owner-compensation rules.

15. Know When an S Corp Might Become Worth Considering

An S corporation can potentially reduce employment-tax exposure for some profitable businesses.

But an S Corp isn’t automatically a tax-saving machine.

It introduces additional responsibilities that may include:

• Payroll
• Separate tax returns
• Reasonable compensation
• Additional bookkeeping
• Additional accounting costs
• Administrative requirements

A business earning $20,000 of annual profit has a very different analysis from one earning $200,000.

There isn’t one universal income level where every business should become an S Corp.

Run the numbers for your business.

Related: LLC vs. S Corp in Wisconsin: When Does an S Corp Actually Save You Money?

16. Consider Retirement Accounts

Business ownership can create additional retirement-saving opportunities.

Depending on your circumstances, options might include:

• Traditional or Roth IRA
• SEP IRA
• SIMPLE IRA
• Solo 401(k)
• Employer-sponsored retirement plan

Different plans have different:

• Contribution rules
• Tax treatment
• Deadlines
• Employee requirements
• Administrative costs

As your business becomes profitable, retirement-plan selection can become part of your broader tax-planning strategy.

17. Understand the Home-Office Rules

If you legitimately operate your business from home, you may qualify for a home-office deduction.

But simply answering emails from your couch occasionally doesn’t automatically make your entire house deductible.

Specific requirements apply.

Depending on your circumstances, qualifying expenses may include portions of certain home costs associated with the business use of the space.

Good records matter here too.

Document the business use rather than trying to recreate it years later.

18. Keep Receipts and Documentation

Your accounting software tells you that you spent $2,000.

Documentation helps establish what you actually purchased and why it was a business expense.

Keep appropriate records for items such as:

• Receipts
• Invoices
• Contracts
• Mileage
• Equipment purchases
• Business meals
• Travel
• Charitable activity
• Payroll
• Vendor payments

Digital recordkeeping can make this considerably easier than keeping boxes full of paper.

The important thing is having an organized system.

19. Don’t Buy Things Just for the Tax Deduction

This mistake deserves its own section.

Suppose you spend $10,000 on something your business doesn’t actually need because someone tells you:

“It’s a write-off.”

A deduction doesn’t generally put the entire $10,000 back in your pocket.

It may reduce the income on which tax is calculated.

You’re still spending real money.

Ask:

“Would I make this purchase if there were no tax deduction?”

If the answer is no, reconsider whether the tax benefit alone justifies the expense.

20. Don’t Wait Until Tax Season to Talk to Your Tax Professional

This may be the most important lesson in this entire guide.

Imagine it’s February 2027 and you’re preparing your 2026 return.

At that point, your tax professional can tell you exactly what happened in 2026.

But many decisions are already history.

Instead, consider checking in during the year—especially when something significant changes.

For example:

• Your business becomes much more profitable
• You hire your first employee
• You make a large equipment purchase
• You add a business partner
• You’re considering an S Corp
• You’re starting a retirement plan
• You’re buying or selling a business
• You’re unsure whether estimated payments are sufficient

Those are tax-planning conversations, not just tax-preparation conversations.

Related: Tax Planning vs. Tax Preparation: What’s the Difference?

Your First-Year Business Tax Checklist

If you recently started a Wisconsin business, here’s a simpler way to prioritize everything above.

Set Up the Business

☐ Determine your legal structure
☐ Understand your tax classification
☐ Obtain necessary registrations/licenses
☐ Determine whether sales tax applies
☐ Obtain an EIN if applicable

Set Up Your Finances

☐ Open a separate business bank account
☐ Consider a separate business credit card
☐ Choose bookkeeping software/system
☐ Create a mileage-tracking system
☐ Create a receipt/document-storage system

Plan for Taxes

☐ Estimate annual business profit
☐ Understand self-employment tax
☐ Determine whether estimated payments are needed
☐ Review federal tax obligations
☐ Review Wisconsin tax obligations
☐ Create a tax savings account

As the Business Grows

☐ Review business deductions
☐ Review retirement-plan options
☐ Review employee/contractor classification
☐ Review 1099 requirements
☐ Evaluate whether your tax structure still makes sense

Starting a Business in Wisconsin?

You don’t need to become a tax expert simply because you started a business.

But you do need a system.

The earlier you establish good bookkeeping, tax savings, estimated payments, documentation, and planning habits, the easier it becomes to manage the financial side of your business.

At La Crosse Tax, we help Wisconsin business owners with tax preparation and proactive tax planning throughout the year.

Whether you recently started a side business or you’re building a company that has quickly become your primary source of income, we can help you understand what your business means for your taxes.

Starting or growing a business in Wisconsin?