Quote:
Originally Posted by jmen24
This is a corporate business tax paid to the state, I have not heard of any other person being affected by this other than LLC business's. If you receive a draw or distribution of profits into a owner's pocket (100% shareholder) than why shouldn't the business pay taxes on that draw. The idea is to use your profits to grow your company (write off expenses), not take company profits and go buy a boat or toys or a second home. Use the money to grow your business and increase your salary as the business makes more profit. Everyone makes noise at the salaries of CEO's for major corps, but when the ratio of pay to company income is put into perspective with LLC's, I think you would fall on the floor.
This is to fill in a loop hole that bring LLC's in line with S-corps and other similar setups. The only people making noise are the ones that have been taking advantage of this for years. Welcome to the world of the big dogs, pay up like the rest of the corporate world does. You will figure it out or maybe you won't, either way it levels the field for those of us that have been paying this for years. I will agree that the percentage is to high but not to much is going to happen about that. We all complain about the politicians getting these loop hole tax breaks, granted they are not losing theirs.
You will also start to see the DBA's being phased out as well, it is already next to impossible to get a bank to set up an account for a DBA (sole proprietorship). To many (not all, but many) DBA's don't pay taxes correctly, if at all.
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Jmen, while I agree with what you are saying here, and I need to admit I am learning a lot here..... I think if Summo Dogs interpretation of the law is correct, the problem here really is a determination on that states part as to what a fair draw is for the owners of a LLC to make.
Well I will admit that quite often self employed people pay themselves to much. How on an idividual case by case bases can that line be drawn of when the extra penalty gets drawn into the equation. The amount of reinvestment into a company from it profits veries greatly by business type. A fence company vs. a computer repair company on a year to year basis could have the same profits, but one probably needs to reinvest into his business more then the other, thus making his salary lower.... So should the guy that can draw a larger salary suffer because he is able to pay himself more?