How do I set aside money to pay my taxes as a small business owner?

you are now self employed this means that each quarter you submit the taxes you anticipate you will owe on form 1040ES from the profit of your business to include your FICA taxes and any income tax you will owe

you need to get your records up to date to know what your profit will be each quarter

By using self-discipline and putting one twelfth of your estimated tax liability for the current year into a bank

account which you will use to pay your taxes when they become due.

At that income level, setting aside 30-40% for federal taxes (including social security and federal income tax) is about right.

You also need something for state tax but the amount varies from state to state.

You are required to send estimated tax payments to the government during the year. If you are going to wait until tax "season" or the end of the year, which is illegal, then add an additional 6% to cover the penalty.

You keep asking questions and every time I read one, it seems like you are missing things.

I'm going to provide more info instead of only what you are asking.

The business does not appear to be a franchise. The way you describe the model it's an independent sales rep.

It sounds like you are doing this for your current employer. Did you approach your employer with this or did they approach you?

- it's not a good idea for your employer to do this mid-year. Being an employee and contractor in the same year does not look good to the IRS, especially if this company is your only source of business (no other income). It doesn't look good when you cross years but the IRS doesn't have a way to link that.

- In a previous question, you said that your current income is $60k annually. In your prior questions, you were thinking your income would be the same. Now you have upped it to potentially $75K. If you only earn $60K, do you realize that you will be taking home a lot less than you were when you were working for this company? That's just straight dollars. What about the benefits you are losing? Even at $75K, you are probably going to come out behind (unless your main goal is more flexibility). Unless the company is forcing you into this business model, $15K is not enough for most people to desire this change.

- Besides losing the benefits, are you taking into consideration the new expenses that you are going to need to incur. The things you don't even think about = like you will like be paying close to $1000 a year, in basic software costs = MS office, Adobe, quickbooks (or similar), email mgmt, etc. The stuff that your employer provided. Yes, this is a tax deduction and will reduce your taxable income, but it's also $1000 you use to have to spend on something else and now you don't.

- What if your book of business doesn't want to go with this? You have to be realistic and expect some will leave. There are lots of distributors in janitorial supply. Maybe they were purchasing from your company because it was direct to the manufacturer. Now that it's not, they may shop around.

- As a business owner you will not be getting a paycheck (unless you end up doing a corp and reading the previous answers, no one is recommending that). You will have accounts receivable.

- If you are not someone who can save, then going independent is going to be problematic, since you are going to need to save.

- If you go with some form of corporation = you will be paying California unemployment and SDI, additionally, you will need workers comp insurance.

To answer your specific question:

How do I set aside money to pay my taxes as a small business owner? Plain and simple, you don't spend all the money you bring in. If you need a separate account for that, you can do that. But if you are someone who can't save, how is a separate account going to change that? You will just be borrowing from that too.

How much do you set aside? A good guideline would = federal & state income taxes will be similar to what you are paying now (what your 2016 1040 lists) and then the extra 15.3% self employment tax.

If you go as a sole proprietor, you will not have any CA short term disability. If you are unable to work, do you have savings that you can rely on to pay your bills? Sole proprietors can purchase into CA SDI but it is very expensive and you have to purchase based on income not amount of coverage desired. You never know when an accident or illness can happen, how will you pay your bills if that occurs?

Keep in mind, you have two issues. One is making estimated tax payments to avoid the estimated tax penalty. This is the form 1040-ES and be done either as based on last year's income or micro managed to each quarter.

The second issue is whether or not you owe when you go to file. The only way to avoid that is to micromanage each quarter. Start by putting at least 40% aside (15% for SE tax, 15-20% for federal tax and 5-10% for state tax).

Your CPA should estimate what you are going to own and prepare IRS form 1040-ES (as in ES-timate) that shows what you need to pay and when you need to pay it.