Explain to me so that a child can understand it how John Doe the plumber who hires 4 of his plumber friends to start a small business, and who does well to take in 300K in revenues, pays 200K (50k) each to his plumbers, pays 50K in expenses, and only has 50K left over for his own salary during these incredibly tough times should be labeled RICH by Obama and get a tax increase. There is NO ONE in that company making over 50K and Obama says the owner is RICH and needs his wealth redistributed. EXPLAIN WHY THAT IS CONSISTENT WITH HIS STATEMENTS THAT ONLY THOSE "MAKING" 250K OR MORE WILL SEE A TAX INCREASE!!!
Joe would report every dime of net income made on schedule C as personal income
That's correct. So MiamiMoron's example is: business makes $250K, Joe pays himself $50K. $200K goes to the other four employees. Joe gets taxed on his $50K salary, and the ZERO dollars profit in his business. ($250K in - $250K in salaries equals ZERO NET INCOME)
>>Accounting 101 seems such a quaint memory these days...
Don't fee bad, there are so many errors that it is hard to keep up with them.
"Joe would be taxed on schedule C unless he formed a C-corp or LLC"
Since an LLC can be taxed as a sole proprietor, and S-Corp, or even a C Corp. The above statement is nonsense.
<Joe would be taxed on schedule C unless he formed a C-corp or LLC.>
<Joe would report every dime of net income made on schedule C as personal income, regardless if he took all that cash out for himself to use.>
If not a C/S corp or LLC, then you are a Sole Proprieter and the money you make through your business, whether using your name or DBA name...would go right to your personal taxes.
***I think that is what you ment***
1. If you are running the business without being incorporated you have more problems than that.
2. I believe his 250 estimate is on adjusted income and not actual revenue of the business. However, you brought up an EXCELLENT point I must look into this as a small business owner. Please let me know if you find an answer?
<Obama says the owner is RICH and needs his wealth redistributed>
Maybe Joe needs to become a Corporation or..."Chapter 'S'" or LLC instead of a Sole Proprietor.
For a Chapter 'S'...Joe can be everything (Prez, secretary...etc) and maintain 100% stock in his company.
For mine, I get better write offs and also better legal protection....plus it is easier to get medical coverage (in Texas all you need are 2 people minimum to get group rates).
"Small Business Health Insurance in Texas (TX)
If you are a small business with two to 50 employees, you cannot be refused small group health coverage and you cannot be cancelled due to sickness within your insured group".
Joe should ask an accountant to work out some scenarios.