Business Net Income Calculator: P&L Top to Bottom

COGS (Cost of Goods Sold) are costs that scale directly with revenue - materials, direct labor, hosting. Operating expenses (OpEx/SG&A) are the cost of running the business regardless of revenue level - office rent, marketing headcount, software subscriptions. The distinction determines gross margin: COGS reduces it; OpEx does not. High COGS = low gross margin; high OpEx = low operating margin.

C-Corps: 21% flat federal rate (plus state corporate tax, which varies 0-9.99%). Pass-through entities (S-Corp, LLC, sole prop): use your personal marginal rate on business income, typically 22-37% federal depending on total income. For a $400k consultancy with no employees, a top-bracket rate of 37% is a reasonable worst-case. For more accurate estimates, include state income tax in your total effective rate.

Operating income (EBIT) is gross profit minus all operating expenses. EBITDA adds back depreciation and amortization (non-cash charges) to EBIT. A software company with $3M operating income and $400k in software amortization has $3.4M EBITDA. EBITDA is widely used in M&A valuation because it is a proxy for operating cash flow, but it is not GAAP.

Not necessarily. Net income is an accrual-accounting concept. Your actual cash position depends on accounts receivable (revenue earned but not collected), accounts payable (expenses incurred but not yet paid), inventory changes, deferred revenue (cash collected but not yet earned), and capital expenditures. A profitable business can have negative cash flow if it is growing rapidly and funding working capital.

For a sole proprietor, net income from Schedule C flows directly to your 1040. You pay income tax on it at your marginal rate plus 15.3% self-employment tax on the first 92.35% of net SE earnings. The $184,500 (2026) SS wage base applies to the SE tax. Half of SE tax is deductible above the line. Use the calculator with a 37% tax rate as an approximation, but note it understates total burden because SE tax is separate from income tax.