Accting/Tax question when buying a business

[Son of a Gann]

Quote from jficquette:

SAIP but he will taxed a captial gain rate at the sale. If you pay him in 1099 income it will be at ordinarly rates.

He is better taking the captial gain tax for the sale and you carry a note that you pay to him. The note will be a return of capital.

Other wise he will be payin 15% a year in social secruity tax.

Nobody pays double SS tax. Stop it already.

Look at form 1040
line 12 business income or loss schedule C
line 27 one half of self employment tax (deduct)

Example:

Business income 100K
Double tax - 15K
Total business income 85K


Form 1040
line 12 income 85K
line 27 - 7.5K

AGI 77.5K (this is NOT your taxable income)



Second Example:


Business income 100K
Double tax - 8K (underpaid by 7K)
Total business income 92K


Form 1040
line 12 income 92K
line 27 - 4K

AGI 88K (this is NOT your taxable income)

Taxable income is taxed based on your tax bracket after applying allowable deductions and credits. (line 43 on 1040)

Here is real example
AGI 119K
taxable income 78K

Stop with double social security tax.

Double taxation is only when you own your business through Corporation.
(And only when it is regular C corp., S corp taxed as self employed).


corporation is taxed than,
dividends taxed.