Control of the money doesn't change hands. Owners instead of putting all the earnings into the growth of the company decide to pocket some of them. What if you have a store and you hired a manager to run it. It is a sole proprietorship - the manager hands you over the earned cash at the end of the day and you pay your taxes on it. By your logic - the owner should pay taxes twice for some reason. Once when his store earned the money and then when the manager gave him the earnings.
Let me try it from the other side.
Sole Proprietorship - owner pays personal income taxes on whatever the company earns. Can pocket whatever they want after the taxes are paid.
Partnership - owners pay personal income taxes on whatever the company earns. Taxes are split between partners depending on their investment into the company. Can pocket whatever they want after the taxes are paid.
Corporations - owners pay corporate income tax. And after that they have to pay an additional tax in case they want to pocket the earnings.
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timeasmymeasure
no subject
Date: 2012-08-21 01:06 am (UTC)Let me try it from the other side.
Sole Proprietorship - owner pays personal income taxes on whatever the company earns. Can pocket whatever they want after the taxes are paid.
Partnership - owners pay personal income taxes on whatever the company earns. Taxes are split between partners depending on their investment into the company. Can pocket whatever they want after the taxes are paid.
Corporations - owners pay corporate income tax. And after that they have to pay an additional tax in case they want to pocket the earnings.
Why is it fair for owners to pay taxes twice?