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Which of the Following are "small Businesses" under the tax code

Which of The Following are "small businesses" - Check All that Apply

  • A TX electric power gen company sold for $45B and over 3,000 employees

    Votes: 0 0.0%
  • An Oil company with $50 Bil/yr in revenues and 150,000 employees

    Votes: 0 0.0%

  • Total voters
    7

degsme

Council Member
Much has been made about how a tax rate increase above $250k income would hit small business. So lets see how many folks here understnad what counts as a small bussiness
 

Bo-4

Senator
I believe anything under 500 employees counts as a small business regardless of revenue. That means Bechtel corporation with 32 billion in 2012 revenue is considered a small business. Which is why raising taxes on the rich would only affect 3% of "small businesses".
 

degsme

Council Member
Answers
  1. This IS a "small business" according to the GOP's calculations. It has no intention of staying in business past 2015 because it will have met its tax benefits and will be dissolved
  2. This is NOT a "small business" - it is the publically traded Dolby Labs
  3. This IS a "small business" - it was a public company, KKR bought it out and restructured it as a privately held Sub-Chapter S corp which makes it a "small business"
  4. This IS a "small business" - it is Realogy a private realestate hedge fund that had to be bought out during he crash
  5. this IS a 'small business" - Its a company I've done some consulting for. Its growth rate is in no way connected to the tax rates. whether it hires or not is driven by whether it can make its 5:1 ROI target BEFORE taxes
  6. this IS a 'small business' - it was a company started by a friend of mine in hopes of using it to pay for his college tuition. It failed. It never came close to being affected by taxes on $250k in PROFITS. He would have loved to make $30k in profits
  7. This IS a "small business" - its a startup I worked at many years ago but notice how similar this is to the next company.
  8. This is NOT a "small business" - this is what Microsoft looked like in 1982. they had already decided to be "marxist" and distribute the value of the company to its employees in the way of Stock Options. To do so they had to increase the number of owners past the "Sub-chapter S" limits and thus were not a "small business"
  9. This is clearly NOT a small business though in terms of the Oil Biz it is not large.- but in terms of economics its not that different than Realogy
  10. You tell me... this is a local organic CSA - who's owner is very progressive. Has he gone the Microsoft Path? Or has he gone the other startup path?

    Can you tell from just the numbers? I cannot
    Can you tell from the number of jobs created? I cannot
    Can you tell from the number of employees? I cannot


That's the point. The notion of
  • What is a small business and what is not
  • Which small businesses CREATE NEW JOBs and which ones do not
  • Which small businesses are just TAX SHELTERS and which ones are actual business
is not at all clear under the current tax law
 

degsme

Council Member
I believe anything under 500 employees counts as a small business regardless of revenue.
Wrong.

"small business" in terms of the discussion of "who would be affected by the $250k threshold tax rate increase" is purely those companies that are listed as "sub-chapter S" corps.

"S-Corps"
  • Have no limits in revenues
  • Have no limits in the number of employees they have
  • Are ONLY limited in the number of shareholders they can have (13 IIRC)
  • Pass through profits directly to the owners without corporate taxation


Go see my answer key. It will confuse you.
 

Bo-4

Senator
Thanks Degs.. clear as mud isn't it? We've got to overhaul and simplify the entire code to keep idiots (like Willard) from legally exploiting the system.
 

degsme

Council Member
Bump, Fxstk, Barbella, Jen, JackDalls - I'd appreciate you weighing in to see what your perceptions are. I'm trying to have an informative discussion here.
 
I confess to not knowing the actual definition of small business. I thought it was totally a head count deal with 1000 being the cut off line. But it really does not matter does it because as you pointed out, no one ever defined what the hell the term meant publicly nor was it ever part of the national media storyline. Small business was like fiscally responsible, a buzz line that everyone knew was bullshit but somehow just agreed to keep spewing because of laziness and perhaps fatigue. This is what Obama needs to do in the second term. Educate the masses about the key concepts like a professor and get this nation out of this stupor of ignorance and double speak.
 

degsme

Council Member
The definition of a "small business" in the tax discussions of the election and all the statistics are "Sub-chapter S Corps" which basically are 13 or less shareholders and do "pass through earnings" IE the earnings of the company are not taxed - instead ONLY the distirbutions to the owners are taxed as owner income.

So a multi- billion dollar Hedge fund COUNTS AS A SMALL BUSINESS if it has 13 or less shareholders. It can have thousands of employees and still be a 'small business".
 
That definition has to change. Maybe we need several different degrees of what it means. A small business category could be broken into:

1. Single owner, no employees.
2. Less than 100 employees.
3. 100 to 1000 employees.

define them by the number of employees solely?
 

degsme

Council Member
That definition has to change. Maybe we need several different degrees of what it means. A small business category could be broken into:

1. Single owner, no employees.
2. Less than 100 employees.
3. 100 to 1000 employees.

define them by the number of employees solely?
Well then you have the problem of companies simply never growing beyond that size. Instead they found another company that is a wholy owned subsidiary but is a different company

and similar games. Frankly it seems to me the best way to do it would be to look at asset valuation. Namely if you are under $5 mil in capital assets, you can be a Subchapter S. And create an AMT for this - in that alternatively if you have GROSS revenues of over $10 Mil, you can no longer be a Subchapter S and have 1 year in which to reincorporate as a normal corporation.
 
OK but then you must attempt to associate small with payrolls so you can track job creation with policy...there has to be a way to measure job growth per sector..
 

fxstc

Council Member
None of you know because,

Obama hasnt decided yet what constitutes a small business.
Never fear tho, you will find out Jan 1st
Sarcassium intended
 

amfh

Council Member
I have a question. A rightwingnut guy I know is decrying the $250K thing.
He runs a demolition business and employs contractors (I don't think he has any permanent employee other than himself).
Wouldn't he have to earn at least $250K PERSONALLY? Then pay the extra tax on anything OVER $250K?
First, I know he doesn't earn $250K per year, but even if he did earn, say $300K, he'd pay more tax on the extra $50K, right?

I admit to being confused about how this works.
 

degsme

Council Member
I have a question. A rightwingnut guy I know is decrying the $250K thing.
He runs a demolition business and employs contractors (I don't think he has any permanent employee other than himself).
Wouldn't he have to earn at least $250K PERSONALLY? Then pay the extra tax on anything OVER $250K?
First, I know he doesn't earn $250K per year, but even if he did earn, say $300K, he'd pay more tax on the extra $50K, right?

I admit to being confused about how this works.
His BUSINESS would have to earn $250k PROFIT to be affected by this. IF his Cost Of Goods Sold for example, included buying some trucks and paying drivers to drive them he would then have to earn ALL the cost of those Trucks - including amortization - AND the wages PLUS $250k MORE to be affected. Note that the appreciation of his business based on cashflow value (typically 3x the cashflow) IS NOT TAXED at least until he sells out. So if he for example plows everything back into his business and instead BORROWS money based ont he business valuation, he owes ZERO taxes
 
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