Civil Discussion -- Business Owners & Corporations Aren't All Bad

When I was young I was college dropout, worked minimum wage jobs and worked my way up. My family had no money and I've had a business fail and had to start all over more than once in my career. Currently I run a business and employee 10 people and employee a nanny.

There is a LOT of risk associated with selling our company's services, managing the cash flow, keeping everyone happy, making sure they have meaningful benefits, making sure they feel developed and inspired. I earn above average money, I am forced to have the discipline to keep a lot of cash on hand for the business and at year-end I pay a ton of taxes.

One part of my job is RUNNING the business, one part of my job is WORKING IN the business, one part of my job is HELPING OTHERS WORK IN the business and the other part of my job is FUNDING the business. Those 4 dynamics (and let's not forget the Nanny) take a toll on me as a business owner.

At the end of the year I pay taxes on the wages I paid myself, I pay taxes on all the companies earnings and have to have that cash available (and consequently no longer available to make payroll) to pay in a lump and I am not able to write off certain expenses of my own. Example: I pay 50% of all employees health benefit but I'm no elegible to have "the business" pay 50% of mine so my health benefits I have to pay out of pocket.

I go through this dissertation because before I owned a business, I had a really oversimplified view of how easy it was to structure, manage, finance and handle the taxation related to a business. I thought people that made 30% to 40% mark-up on things were gouging people. That was before I realized ALL that goes into overhead and then how much more gets raked off in taxes. APPARENT WEALTH is so rarely real. LARGE INCOME AND REVENUES are very rarely REAL RETAINED MONEY. Now that I understand this, it really upsets me to hear so many people that have jobs rage against those that have accumulated wealth. Or those that simply write off "corporations" as bad entities.

I think there is a reverse CLASS WAR going on right now. At precisely the time when you need people willing to take risks, take their money out of savings and try to start enterprises, have some tax breaks to slog their way through the typical unprofitable first year or so, we have everyone trying to raise taxes and rail about individuals with money and greedy businesses. You cannot have it both ways. You can't be simultaneously socialist (collect much and redistribute much), capitalist (allow the business entities and those willing to fund the risks) and communist (collect all above certain caps and redistribute in a manner that serves the state but not necessarily the people or growth).

If we could for a moment stop the oversimplified discussion of taxing the rich and feeding the poor, I think it would be worthwhile for certain communities or certain states to be able to run pilots or experiments with tax models to see if a growth economy could be created. Even in the president's statements tonight he talked about not racing to the bottom but in fact racing to the top. You do not create interest or incentives for racing to the top (planning for it or paying for it) when the proceeds will be immediately collected. Does anyone know of communities that are testing alternative tax models? Thoughts? I'll all pooped out now.

This thread is obviously for people who have some time on their hands and are interested in a thoughtful discussion. I can't only say so much about the flooding and Sunday's potential threat.

You are an evil capitalist existing off of the sweat and labor of the working class. The workers don't need you. You should give everything to the workers and take your place on the factory floor as their equal [/sarcasm]

Good job explaining it all my friend. The socialists will still hate you anyway though.

S&F

As small business owner I feel the pain. It's not easy but it's the choice we have made for the freedom that comes with it, or at least self determination.

As far as tax model go the best I've heard of was in the UK, although I'm not precisely sure of the details. Whether or not this is still valid I don't know, however, NEW companies were exempt from paying corporation tax (tax on profit) for something like the first 3 years so long as it was demonstrated that the profit was re-invested back into the company. Certainly a good idea since most businesses fall over in the first 5 years.

Cheers

As a small business owner you have a greater tax burden than a large corporation. Many of them pay little if any taxes. There was recently a thread on here about GE paying no taxes.
Excellent job explaining how things work in a small business. S&F for a great effort.

Originally posted by myselfaswell
As small business owner I feel the pain. It's not easy but it's the choice we have made for the freedom that comes with it, or at least self determination.

Cheers

Oh trust me...I know it's the choice we made and I LOVE IT. Wouldn't change it for the word. Just wish others could understand it a little better so they stop assigning so much judgment.

Originally posted by lonegurkha
As a small business owner you have a greater tax burden than a large corporation. Many of them pay little if any taxes. There was recently a thread on here about GE paying no taxes.

Private and public business have a different situation. I guess I need to learn more about how tax burdens are paid for in a public company. You're right as a small business owner the full tax burden just shifts to my personal return. I wonder how that work in a large public company. I guess the publicly held balance sheet is supposed to take the hit and then dividends are supposed to be affected. Doesn't have the quite the consequence that a small business owner faces. Would be interesting if the Board and Senior Executives have earning and loss shifted to their K-1s. Hmmm.

M

reply to post by Losonczy


Your story is much like my father's.

Honestly, not that I'm ungrateful, I mean, he built a financial empire "out of nothing", but to say that he never had to push some heads under to catch his breath would be a flat-out lie.

As the to-be beneficiary of a corporation, I personally believe that corporations are as fundamentally flawed in premise as communism or fascism. Humans should not be working to get ahead of eachother when it comes to survivability, because that literally kills people.

Corporations aren't ALL evil, but the fact that they are REQUIRED BY LAW to make more and more money for stockholders corrupts the entire idea of it. It's a pipe dream; the corporate system will never coexist with a stable economy, its set-up will always skew the distribution of wealth and benefit those who need help the least, while bolstering wealth for those who don't need it. Eventually, to appease the legal responsibility to raise stockholder value, workers are exploited, quality of goods and services are compromised, and work is eventually forced overseas.

You worked for money, yes, but now you've sealed that. Hopefully you, like my father, will realize that the opportunities you had when you were younger are so scarce these days that it's something that you can't plan to do. If you think that we still have these opportunities, you're far too caught up in your own success to acknowledge modern reality. This is not the 60s, 70s, 80s, 90s, etc. Times change.. gradually, but they change, and those who have the power only want to give themselves all of the benefits, and will try their hardest to make sure that people don't copycat their success. Younger people these days are not allowed to catch up, and starting a small business in this economy is so risky it's almost not even worth thinking about. The younger generations are basically slaving it out for those who have all the money and would like to keep it that way. Most newly-implemented small businesses just pay off their expenses and make pennies in profit while already-established companies and corporate entities seek to eradicate all of their small business competition.

The system doesn't work, and I see why you're fighting for it, you seem to think that you "worked hard" for it, but the plain reality is, there are other people working much, much, much harder and struggling to survive. And THAT is the truth. Sorry.

I just happen to be in the process myself of becoming an evil capitalistic overlord....

From what you have told us, you have entered a mistaken area in this fact...

You are not a businessman, but an employee in charge of his own work... Yes you are an employee... A lot of small business owners run into this....

If you can swallow this fact you can get to the next level your post aims for... (it seems to cry out to me)

1) CPA's can be found and paid for
2)you legal team....

3)these two meet and help you decide structure...

note: from the sound you are drowning and the first issue is structure... It sounds like the needs of an LLC...

please note that the structure also protects you from a lot of legal hassle.... as long as you keep all the business accounts seperate completely from your personal accounts....(seperate completely magic word)

4) with this structure you can find a decent manager.... hire them then pay them....

5) if you do not like this advice remember you can at least go to the SBDA (small business development a???)
and ask for help frome S.C.O.R.E. ( retired businessmen who give back) and the best thing is that it only cost you your most valuable asset... TIME..... cash wise they are free....

Your team needs some new players... CPA, Lawyer, Manager, SCORE.... and you can go in any order... If saving money is an issue talk with Score first to arrange what needs to be done in each...

order of operations....

the score rep will probably say
Lawyer with the new business structure
hire the CPA
and insure the good manager.....

And remember the SBDA should just about hold your hand throuhg the process..

I hope this helps op.... just remember the idea of owning a business is not to be owned by it...


please disregard the disorder in the above statements... they are designed to ensure you can remember them


Score- structure and free advice
Cpa- books and cash reciepts
Lawyer - structure legality and extent of pro tections
manager- delegate as much as possible to.....