Question by Joe: Are small business earnings treated the same as personal income for taxes?
A friend argued that progressive taxation hits small business income, because, in addition to individuals making over a certain amount, it also targets the total earnings of small business (before recouping expenses and paying employees)
In other words, If a small business pulls in $ 300k a year, but has to pay $ 150k in expenses and $ 100k in payroll (leaving $ 50k salary for the business owner), is the entire $ 300k hit by income taxes or just the $ 50k?
Answer by v b
It’s after expenses–which includes employees.
This true for all business structures…though the there is a huge difference for all owners between being a sole proprietorship/partner vs being a corporation.
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