You are very wrong my friend.
“An S corporation is a regular corporation that has between 1 and 100 shareholders and that pases-through net income or losses to shareholders as individual income in accordance with Internal revenue code, Chapter 1, subchapter S. Corporations must meet specific eligibility criteria, and they must notify the IRS of their choice to be taxed as an S-Corporation within a certain time period.”
As for an LLC:
“An LLC is not a separate tax entity like a C corporation; it is what the IRS calls a pass through entity, like a partnership. All of the profits and losses of the LLC pass through the business to the LLC owners, who report this information on their personal tax returns.”
I have owned one of each and have thus filed taxes under said structure. Obama’s tax hike would indeed hurt the very people that move the economy. Over 60% of all new hires are from small business. That means they are either a sole proprietorship, S Corp, or LLC. It matters not tax wise.
I’d post a link, but all you have to do is google any of the three entities and you will see that I am correct.
Interesting… I don’t know about your lawyer and/or accountant, but our business started out as an LLC filing as an S-corp under form 8832. We eventually re-filed as an S-corp for the sake of simplicity. In either instance, we had a number of ways of sheltering ourselves from pass-through profits or losses. We put a lot of the profits back into the company every year, and we did not pay taxes on this. A sole proprietor (though, I’ve never had the experience) as I understand it is treated very much like someone on a payroll… Any money that comes in, they get taxed on… regardless of whether or not it goes back into the company or against losses. Granted, they get taxed at a much lower rate… it only seems to make sense in certain purely transactional businesses.
The important term, BTW, is “net.” A sole proprietor is responsible for “gross” profits and losses. It’s an entirely different ball game.
Having seen how much money it is possible to shelter and avoid paying taxes on in a small business, if the owner of an LLC or S-corp ends up with $250K + at the end of the year, then they are no more immune to a higher tax bracket than a person on payroll making those numbers, in my opinion.
The point is they are not taxed as a standard C corporation. And thus Obama’s tax hike on “the rich” will negatively effect them and consequently harm the potential to bring this economy back.
One more interesting point. I have a few good friends who are bankers and their banks seem to be very aggressive when it comes to trying to make small business loans. The problem is that the typical small business man/woman is afraid to take a risk on a loan right now because of all the democrats and Obama’s threat to raise taxes. If the republicans have their way and the Bush tax cuts are extended to everyone I think we’ll see this economy actually take off. This of course will help the ivory towerist and chief in his reelection bid.
I really wonder why it’s so important to punish those who have succeeded? Class warfare, launched by the democrats, is a very poor strategy to actually govern with.
You’re making a pretty damn big claim here… in reference to what your “friends” are telling you. Do you have anything to back this claim up with, other than us being expected to believe what you have written?
Second. In regards to this statement;
What exactly is going to change in the tax code, if the Republicans have their way?