vania-janet/multiturn-rag-retrieval-data huggingface dataset:
Quote: For a single individual with no income other than taxable Canadian dividends which are eligible for the small business dividend tax credit, in 2014 approximately $35,551 [...] could be earned before any federal* taxes were payable. * Provincial DTCs vary, and so combined federal/provincial maximums vary. See here. If you're wondering about ""non-eligible"" vs. ""eligible"": private small business corporation dividends are generally considered non-eligible for the best DTC benefit—but they get some benefit—while a large public corporation's dividends would generally be considered eligible. Eligible/non-eligible has to do with the corporation's own income tax rates; since Canadian small businesses already get a big tax break that large companies don't enjoy, the DTC for small businesses isn't as good as the DTC for public company dividends. Finally, even if there is hardly any same-year income tax advantage in taking dividends over salary from an active small business corporation (when you factor in both the income tax paid by the corporation and the individual), dividends still allow a business owner to smooth his income over time, which can result in a lower lifetime average tax rate. So you can use your business as a retained earnings piggy bank to spin off dividends that attract less tax than ordinary income. But! ... if you can convince somebody to buy your business from you, then you can benefit from the lifetime capital gains exemption of up to $800,000 on qualifying small business shares. i.e. you can receive up to $800K tax-free on the sale of your small business shares. This lifetime capital gains exemption is a big carrot—designed, I believe, to incentivize Canadian entrepreneurs to develop going-concern businesses that have value beyond their own time in the business. This means building things that would make your business worth buying, e.g. a valued brand or product, a customer base, intellectual property, etc. Of course, there are details and conditions with all of what I described, and I am not an accountant, so please consult a qualified, conflict-free professional if you need advice specific to your situation."
The only way you can save taxes is by starting a limited company, not paying yourself any salary, so you pay 20% corporation taxes, you can take I think £5000 a year dividends tax free, and leave the rest in the company account, and don't touch it until you make less money.
An LLC does not pay taxes on profits. As regards tax a LLC is treated as a Partnership, but instead of partners they are called members. The LLC is a passthrough entity. As in Partnerships members can have a different percentage ownership to the share of profits. The LLC reports the share of the profits of the members. Then the members pay the tax as an individual. The profit of the LLC is deemed to have been transferred to the members regardless of any funds transferred. This is often the case as the LLC may need to retain the profits for use in the business. Late paying customers may mean there is less cash in the LLC than is available to distribute.  The first answer is wrong, only a C corporation files a tax return. All other corporate structures are passthrough entities. The C corporation pays corporation tax and is not required to pass any funds to the shareholders. If the C corporation passes funds to the shareholders this is a dividend, and taxable to the shareholder, hence double taxation.
They take in a *lot* through Corporation Tax, so it'd be relatively unfair to non-business owners and non-shareholders to put it onto VAT and income tax. In the Starbucks case, they'd still want to get the money out of the country so would end up paying no more tax than now.  One alternative along the lines you state, though, would be to crank up capital gains and dividend taxes to match what's taken in by Corporation Tax now. After all, those are the other ways (than income) for owners and shareholders to extract value from corporations and would be tricky to dodge unless you're outside of the EU.
Your question mixes up different things.  Your LLC business type is determined by how you organize your business at the state level.  Separately, you can also elect to be treated in one of several different status for federal taxation. (Often this automatically changes your tax status at the state level too, but you need to check that with your state tax authority.) It is true that once you have an EIN, you can apply to be taxed as a C Corp or S Corp.  Whether or not that will result in tax savings will depend on the details of your business.  We won't be able to answer that for you.  You should get a professional advisor if you need help making that determination.
This actually makes sense, although it's about twice as complicated as any concept I've seen laid out in a business, rather than economics context, so it's no surprise that people (as you say) get it wrong.   Also, it emphasizes that corporate taxation is not exactly an easy thing to deal with.
"The $100,000 is taxed separately as ""ordinary income"". The $350,000 is taxed at long-term capital gains of 15%. Capital gains is not taxed at 20% until $415,050. Even though $100,000 + 350,000 = $450,000, only $350,000 can be taxed at capital gains. The total ordinary income tax burden will be $31,986 if single, in California. Caveat: By creating a holdings corporation (C-corp), you can section 351 that $100,000 into the C-corp for tax deferment, which won't be taxed until you take money from the corporation. Since you will hold 100% of the voting stock, all distributions will be considered pro rata. Additionally, you can issue yourself a dividend under the rules of 26 USC §§243-246 (a greather-than-80% shareholder who receives a dividend can write-off 100% of said dividend). As long as that dividend doesn't trigger §§1.243-246 of The Regulations by keeping the distribution just under 10% of E&P i.e. $10,000. Wages are deductible against basis so pay yourself $35,000 and keep $55,000 in the corporation and you can decrease the total liabilities down to $22,000 from $31,000, which includes the CA franchise tax. You don't have to pay yourself any money out a corporation to use the money."
I think this question is very nearly off-topic for this site, but I also believe that a basic understanding of the why the tax structure is what it is can help someone new to investing to understand their actual tax liability. The attempt at an answer I provide below is from a Canadian & US context, but should be similar to how this is viewed elsewhere in the world. First note that capital gains today are much more fluid in concept than even 100 years ago. When the personal income tax was first introduced [to pay for WWI], a capital gain was viewed as a very deliberate action; the permanent sale of property. Capital gains were not taxed at all initially [in Canada until 1971], under the view that income taxes would have been paid on income-earning assets all along [through interest, dividends, and rent], and therefore taxing capital gains would be a form of 'double-taxation'. This active, permanent sale was also viewed as an action that an investor would need to work for. Therefore it was seen as foolish to prevent investors from taking positive economic action [redistributing their capital in the most effective way], simply to avoid the tax. However today, because of favourable taxation on capital gains, many financial products attempt to package and sell capital gains to investors. For example, many Canadian mutual funds buy and sell investments to earn capital gains, and distribute those capital gains to the owners of the mutual fund. This is no longer an active action taken by the investor, it is simply a function of passive investing. The line between what is a dividend and what is a capital gain has been blurred by these and similar advanced financial products. To the casual investor, there is no practical difference between receiving dividends or capital gain distributions, except for the tax impact. The notional gain realized on the sale of property includes inflation. Consider a rental property bought in 1930 for $100,000, and sold in 1960 for $180,000, assuming inflation between 1930 and 1960 was 70%. In 1960 dollars, the property was effectively bought for 170k. This means the true gain after accounting for inflation is only $10k. But, the notional gain is $80k, meaning a tax on that capital gain would be almost entirely a tax on inflation.
I agree in principle, but only if taxes on dividends once distributed are like 75%. Corporations are very large consumers of public goods such as National defense, and a corporate income tax makes sense from that perspective.
The two really aren't easily comparable - you have to look at cost of living.  sdg's calculations account for provincial and federal taxes in Canada, but elide state taxes in the US.  There's also sales taxes, which are usually higher in Canada, and property taxes, which tend to be higher in the US (from my experience).  You also have to include health insurance into your calculations, since that expense is included in your taxes in Canada.
You don't have to register for corporation tax until you start doing business: After you’ve registered your company with Companies House, you’ll need to register it for Corporation Tax. You’ll need to do this within 3 months of starting to do business. Since you haven't needed to do that yet, there also shouldn't be any need to tell HMRC you've stopped trading. So it should just be a question of telling Companies House - I guess it's possible they'll first want you to provide the missing accounts.
Sales taxes are charged at the point of purchase, while a VAT is assessed during the production process of the item. In the end, the amount paid by the consumer is the same, but with the VAT, the tax was collected from the manufacturer, instead of the consumer. One of the big arguments for VAT is that it prevents lost revenue due to things like smuggling (if sales tax increases past 10% smuggling spikes, so the VAT is a good mechanism if you're looking to implement large taxes on goods). It also keeps the tax burden away from shippers and other tiers of the production process that don't change the intrinsic value of the item.
"The founders almost certainly owe tax on the ""income"" represented by the rent they aren't being charged. It isn't clear whether the corporation also owes income tax on the rent it is not receiving back from them. You definitely want advice from a paid tax accountant, not least because that helps protect everyone should this arrangement be challenged."
Schedule C sole-proprietors must base their maximum contribution on earned income, an additional calculation that lowers their maximum contribution to 20 percent of earned income. IRS Publication 560 contains a step-by-step worksheet for this calculation. In general, compensation can be defined as your net earnings from self-employment activity. This definition takes into account the following eligible tax deductions: (i) the deduction for half of self-employment tax and (ii) the deduction for contributions on your behalf to the Solo 401(k). A single member LLC’s Solo 401(k) contributions for profit sharing component must be made by its tax-filing deadline.
&gt; The fact remains that the very wealthy and very large corporations are structured so that they don't pay that particular type of tax.  Going to have to stop you right there. Most Fortune 500 companies pay a LOT of tax. Additionally, they get targeted for audits quite a bit because of their size and complexity. But at the end of the day, if it shows a net profit on their income statement, they're generally paying tax.  Individual tax law is quite a bit different and not my current area of expertise, though I did prepare individual tax returns before I started working for the government and I can say that there are quite a few more provisions for avoiding tax for an individual. Regardless, if you're playing by the rules, there can be a variety of reasons why your 'effective rate' is lower.   A progressive scale for capital gains will just lead to high-income individuals transferring the form of income to something else.
"Depends. If you can choose where to relocate to, then I second the ""no income tax"" states. But even of these chose wisely, some have no income taxes at all, others have taxes on some kinds of income. Some don't have neither individual nor corporate taxes, some tax businesses in some ways. Some compensate with higher property taxes, others compensate with higher sales taxes. On the other hand, you might prefer states with income taxes but no sales taxes. It can happen if your current income is going to be low, but you'll be spending your savings. If you don't have a choice (for example, your employer wants you to move closer to their office), then you're more limited. Still, you can use the tax break on moving expenses (read the fine print, there are certain employment requirements), and play with the state taxes (if you're moving to a state with less/no taxes - move earlier, if its the other way - move later). Check out for cities that have income taxes. In some states it cannot happen by law (for example, in California only the state is allowed to collect income taxes), in others it is very common (Ohio comes to mind). Many things to consider in New York. New York City has its own income tax (as well as Yonkers, as far as I remember these are the only ones in the State of New York). So if you want to save on taxes in NYS but live close to the city, consider White Plains etc. If you work in NYC its moot, you're going to pay city taxes anyway. That is also true if you live in NJ but work in the city, so tax-wise it may be more efficient not to live across state lines from your place of work."
"There are basically two approaches, based on how detailed you want to be in your own personal accounting: Obviously the more like a business or like ""real"" accounting you want to be, the more complex you can make it, but in general I find that the purpose of personal accounting is (1) to track what I own, and (2) to ensure I have documented anything I need to for tax purposes, and as long as you're meeting those goals any reasonable approach is workable."
There's an economic reason you don't want to tax income differently than capital gains.  Capital gains are created by taking risk, and encouraging risk is encouraging entrepreneurial spirit, which as a country you want to inncentivize.  However, after a certain amount of money is made via capital gains the rate should approach income, but never equal it.
"In simple terms, it is a business operation when it becomes a   profit-making enterprise. It is a grey area, but there is a difference between selling   occasional personal items on eBay and selling for profit. I would imagine the sort of considerations HM Revenue & Customs would   take into account are the size of your turnover, the extent to which   you are both buying and selling, and whether you are clearly   specialising in one particular commodity as opposed of disposing of   unwanted presents or clearing the loft. http://www.ebay.co.uk/gds/When-does-eBay-selling-become-taxable-/10000000004494855/g.html I don't believe that you selling your personal camera gear will be taxable, but as the link says, it is a grey area.  They also recommend to do this It's far better than having to deal with an investigation a few years   down the line. When it comes to completing your tax return, there is a section which   is headed ""other income"", and it is here where you will enter the net   earnings from the web business. ""Net"" here means your additional income, less all expenses associated   with it. If you are still worried I would always encourage people to take a cautious approach and discuss their position with HMRC via its helpline on 08454 915 4515."
"If you have a single member LLC there is no need to separate expenses in this way since it is simply treated as part of the owner's normal tax returns.  This is the way I've been operating. Owner of Single-Member LLC   If a single-member LLC does not elect to be treated as a corporation, the LLC is a ""disregarded entity,"" and the LLC's activities should be reflected on its owner's federal tax return. If the owner is an individual, the activities of the LLC will generally be reflected on: Form 1040 Schedule C, Profit or Loss from Business (Sole Proprietorship) (PDF) Form 1040 Schedule E, Supplemental Income or Loss (PDF) Form 1040 Schedule F, Profit or Loss from Farming (PDF) An individual owner of a single-member LLC that operates a trade or business is subject to the tax on net earnings from self employment in the same manner as a sole proprietorship.   If the single-member LLC is owned by a corporation or partnership, the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership. https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies"
Public sector and private industry retirement plans, taxation and estate planning would be the most substantial differences between the two countries. The concepts for accumulating wealth are the same, and if you are doing anything particularly lucrative with an above average amount of risk, the aforementioned differences are not very relevant, for a twenty something.
"So some background here - when corporations, large ones have to deal with tax, they generally try to avoid as much tax as possible. Since there are places that are ""tax havens"" where there is less to even no tax on profit, a lot of money gets routed there to avoid taxes in other places (US or other unfavorable countries). The problem with this from an IRS/government view is that they keep losing millions/billions of dollars in money because of this. I think the corporate federal tax rate is around 35% and that is without state taxes.       Unfortunately when you have less and less money at home - less investment at home happens. Corporations stop doing business at home because they have more money somewhere else - and it makes sense to move more of the company to where the money is or to more favorable tax locations. Even worse - the corporation might just ""save"" its money somewhere else and kill all reinvestment - thus the money is effectively dead to the rest of the economy.      There is a lot of talk about a 'one-time' repatriation tax to allow companies that have dodged their tax burdens to have their money come back to the US (and thus can be used locally) at 10% instead of 35% since there is theroretically a vast amount of cash that would be injected into the US economy. The government is hoping this stimulation will help GDP grow, taxes grow, and help the economy as a whole. In reality, it will reward corporations that broke the law (even though everyone does it), and probably just go into savings accounts here in the US - and not be the ""silver bullet"" to the economy on verge of collapse again."
"People are arguing the irrelevant net income/sales debate. It's a moot point.   The papers are bringing to light 100% legal tax-avoidance schemes limiting tax liability. Ikea does it. Apple/Google does it. Everyone does it.  1. All Starbucks European sales are charged 6% of total sales in intellectual property royalties to a Swiss and Dutch subsidiary. Dutch sub is officially labeled as the HQ and has 73M euro revenue, but only has 97 employees and 500k euro profit. Moreover, those countries have only 2% corporate tax, and the EURO President is based in London.  2. Starbucks owns vertical supply chain subsidiaries that does the coffee buying, roasting, packaging and charges a premium called ""transfer prices"" to Euro Starbucks. Those subsidiaries are located in Switzerland (2% tax vs 24% tax in UK).  3. Starbucks UK is funded through debt as it takes out inter-company loans at 4%+Libor (McD pays at or below Libor).   [\[Source\]](http://www.msnbc.msn.com/id/49417811/ns/business-world_business/#.UH2XNMXA--0)"
I also reckon the tax situation is a relevant difference. I'd rather take shares over a wage when, you know, I'm not / minimally taxed for capital gains, at a rate way lower than what I should be paying for the equivalent as income tax.
avoid corporation tax There aren't many avenues to save on corporation tax legally. The best option you can try is paying into a generous pension for yourself, which will save some corporation tax. Buying a house You can claim deduction for the mortgage payments, but profits on selling the house will require paying capital gains tax on the profit. You can rent it out, this will be decided between your mortgage provider and your company, but the rent will go towards as income.  Buying a car Not worth it. You will have to pay Class 1A NI contribution for benefits in kind. Any sane accountant will ask you to buy the car yourself and expense the mileage. Any income generated from the cash you have is taxable. Even the interest being paid on your money is taxable.
Typically, a transfer of money isn't taxed in and of itself. If they send you $1000 and you send them goods, your profit is what would be taxed, not the full amount sent to you. You need to keep track of all money you spend to acquire the goods, and all money coming in, so you can declare the profit you've made as income. Your question appears to be less about personal finance, and more about running a small business.
Unless the amounts involved are very small, it is MUCH better to incorporate. First, incorporation gives you limited liability for your acts as an employee. As an individual, you have unlimited liability. Second, incorporating allows you to deduct (for tax purposes) the costs of doing business, including all of your health insurance, most transportation, and some meals. The exception to the rule is if the amounts you are earning are so small that they don't cover the cost of incorporating, accounting fees, etc. (a few hundred, or at most a few thousand dollars).
&gt;What do you think of the argument that corporations shouldn't pay any tax, since investors pay tax on the dividends, and if the corporations paid too, that would be double taxation?  Nobody that's actually serious makes this argument (at least not the way that you wrote it).  Some people argue that corporate taxes should be eliminated and that capital gains and dividends should be taxed the same as ordinary income.
"Being self employed just means you fill out some more forms in your annual self assessment for your ""profit"" from being self employed.  Profit = all the money you receive, minus any tax deductible cost that you spent for making that money (and all the cost must be documented, which means you have a folder with all the receipts and keep it safe). You pay normal income tax on all the profit, which means it is just added to your taxable income. What you do with the profit is up to you; you don't pay yourself a salary, just take the money (make sure you leave enough to pay your taxes)."
Unless you make those investments inside a tax-deferred account, you will have to pay income-taxes on that money this year. Because you made that money through your own business, you will also have payroll taxes due on that money this year.