One negative aspect to being an owner of small business is the self-employment tax(SECA). The self-employment tax is the self-employed equivalent of the payroll taxes that employees and employers pay (FICA). A business owner is required to pay self-employment taxes at a rate of 15.3% on your net earning up to $ 97,500 for 2007. For net earning in excess of $ 97,500, a business owner will pay further taxes at a rate of 2.9 % on the excess.

Those who pay the self-employment tax are allowed a partial deduction for the self-employment tax. A business owner is allowed a deduct one-half of his/her self-employment taxes from your gross income. For example, if you pay $20,000 in self-employment taxes, you are allowed a deduction on line 27 of your 1040 return for $10,000.