Microsoft Must be held accountable.

Keith Mastin kmastin-PzQIwG9Jn9VAFePFGvp55w at public.gmane.org
Mon Oct 13 23:31:44 UTC 2003


> On Sun, 12 Oct 2003, Anton Markov wrote:
>> More importantly, a corporation pays taxes on its (or your) net profits
>> rather than gross cash flow as does an individual...
>
> This is true of any business, not just corporations.  It is not necessary
> to incorporate to deduct business expenses against business income (and
> even, indirectly, against employment income*).  Small businesses often
> are not incorporated.
>
> (* You can deduct business losses -- roughly speaking, the excess of
> business expenses over business income -- against other income, e.g. from
> employment, *provided* the Feds believe that your business is legitimate
> and is truly intended to earn a profit.  This is an area which has seen
> many abuses, so any business which makes losses, year after year, that
> are then deducted against employment income, had better have a really
> convincing story behind it if the Feds ask, which they will.  Otherwise
> they will decide that it's a hobby, meaning that its revenue is not
> income, its expenses are not deductible, and you're in trouble.)

There are some distinct advantages of being privately incorporated that
other business models con't allow for though.

With an incorporated company you have corporate costs. Things like annual
shareholders meetings, etc. Plus you can put the executive (yourself) on
salary and roll unpaid salary over into loans from shareholders,
decreasing stock value (each share costs more but is worth less because
the company owes that money back to the lendor) and the overall net worth
of the company. If you set the salary outside market parameters the feds
will jump all over you for a reasonable explaination.

You can also show annual losses just by showing expansion and growth in
the company as a result of reinvestment of all available profits rather
than paying them out in dividends at the end of the year. This has to be
decided at the annual shareholders meeting. :) If all profits go into
making the business a viable asset in the long run (10 years or so), the
feds actually get behind you and offer all sorts help you keep things
rolling along.

These are the reasons why we see companies stay in business in the red for
years when to the untrained eye they look to have no viability. As long as
you can pay your bills and the costs of keeping current are more than you
have available, you're safe.

-- 
Keith Mastin
BeechTree Information Technology Services Inc.
Toronto, Canada
(416)429 9304
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