Small Business and Minimum Wage

mrussel1

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

rgambs

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

What is the advantage to delaying billing until the new fiscal year? I know someone with an S Corp that does that and I don't get the tax advantage.

Gern Blansten

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

mrussel1

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

Right but wouldn't you pay it at your personal marginal income tax rate rather than the business tax rate? That is if you are registered as an LLC with S election? I'm a little bit out kicking my coverage on this one, so correct me if I'm wrong.

Gern Blansten

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

Right but wouldn't you pay it at your personal marginal income tax rate rather than the business tax rate? That is if you are registered as an LLC with S election? I'm a little bit out kicking my coverage on this one, so correct me if I'm wrong.

Yes but it doesn't matter if the profit stays in the corp or not if it is an LLC or S Corp...the owner is taxed individually whether he distributes the profit or not.

My original point was that no one is avoiding tax by pulling profits out of an LLC/S Corp because the tax is exactly the same.

mrussel1

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

Right but wouldn't you pay it at your personal marginal income tax rate rather than the business tax rate? That is if you are registered as an LLC with S election? I'm a little bit out kicking my coverage on this one, so correct me if I'm wrong.

Yes but it doesn't matter if the profit stays in the corp or not if it is an LLC or S Corp...the owner is taxed individually whether he distributes the profit or not.

My original point was that no one is avoiding tax by pulling profits out of an LLC/S Corp because the tax is exactly the same.

Now I remember... If you don't take it as salary, don't you avoid your 15% FICA? I think there is a 'reasonable' rule on salary. In other words if you are showing 50k in profit, you could avoid FICA for the proprietor all together. If you made 500k in profits, you would have to show something, but probably not what you are actually using personally.

Gern Blansten

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

Right but wouldn't you pay it at your personal marginal income tax rate rather than the business tax rate? That is if you are registered as an LLC with S election? I'm a little bit out kicking my coverage on this one, so correct me if I'm wrong.

Yes but it doesn't matter if the profit stays in the corp or not if it is an LLC or S Corp...the owner is taxed individually whether he distributes the profit or not.

My original point was that no one is avoiding tax by pulling profits out of an LLC/S Corp because the tax is exactly the same.

Now I remember... If you don't take it as salary, don't you avoid your 15% FICA? I think there is a 'reasonable' rule on salary. In other words if you are showing 50k in profit, you could avoid FICA for the proprietor all together. If you made 500k in profits, you would have to show something, but probably not what you are actually using personally.

Only if taxed as an S Corp. An LLC is taxed like a sole proprietor unless it elects to be taxed as an S Corp.

Yes there is definitely avoidance of FICA tax by S Corps. The reasonable salary rule is supposed to keep them in check but there is definitely abuse.

mrussel1

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

Gern Blansten said:

mrussel1 said:

rgambs said:

I favor a simple tiered system (that someone else would need to create lol) that implements a series of incremental minimum wages that increase with the number of employees and profit percentage.

So basically you are taking the progressive tax system (marginal income tax) and applying it to wages? Interesting. The tough thing is that small businesses have every incentive to show zero profit. Any LLC owner will tell you that they're pulling money out of the business whenever possible in order to minimize tax liability. They will 'manipulate' the system like the tax code is played a bit today.

Pulling money out for what? How is that manipulating the tax system?

It's perfectly legal but the net effect is lowering the business tax liability. You do it by moving cash between personal and business accounts.

An LLC doesn't pay tax. It's owner(s) pay the tax regardless if it is pulled out or not.

I guess you could have an LLC that elects to be taxed as a regular corp but that is also just transferring corp tax to individual tax at a likely higher rate anyway due to social security/medicare tax.

Right but wouldn't you pay it at your personal marginal income tax rate rather than the business tax rate? That is if you are registered as an LLC with S election? I'm a little bit out kicking my coverage on this one, so correct me if I'm wrong.

Yes but it doesn't matter if the profit stays in the corp or not if it is an LLC or S Corp...the owner is taxed individually whether he distributes the profit or not.

My original point was that no one is avoiding tax by pulling profits out of an LLC/S Corp because the tax is exactly the same.

Now I remember... If you don't take it as salary, don't you avoid your 15% FICA? I think there is a 'reasonable' rule on salary. In other words if you are showing 50k in profit, you could avoid FICA for the proprietor all together. If you made 500k in profits, you would have to show something, but probably not what you are actually using personally.

Only if taxed as an S Corp. An LLC is taxed like a sole proprietor unless it elects to be taxed as an S Corp.

Yes there is definitely avoidance of FICA tax by S Corps. The reasonable salary rule is supposed to keep them in check but there is definitely abuse.

Got it.. I think that's what I meant by "S" election as an LLC.

Not sure how we got here, but I'm smarter for it! Either way, a fed min wage of $15 will be difficult for lower cost of living MSAs. I'm a moderate by nature and a pragmatist. I'm more in favor of a $12, but adding an indexed COLA would be great if it was practical. Not sure if it is.

Gern Blansten

I agree with Bill Maher....I'm sick of paying welfare to full time employees of multi billion $$ corporations (McDonald's, Wal-Mart, etc.)

RoleModelsinBlood31

I'm for raising the minimum wage. That makes sense. The idea of a livable wage to me does not, however. I'm a small business owner and my family and I are by no means making any money off of our hard work. I do 70 hrs a week and my 66 year old mom does about 30, and she works for no pay so we can survive. I make a decent salary but it's not much- I could prob make more being a chef for big companies like I was before this.

I just know that the kids and people I hire don't expect a livable wage working here at a bakery, and they never will. They know that working here or flipping burgers or making subway melts isn't going to pay a livable wage, nor should it.

I feel responsible for my employees well being and make sure I do everything in my power to keep them happy, but if I had to pay $15 an hour minimum I know I would lay off a few people to survive.

brianlux

RoleModelsinBlood31 said:

I'm for raising the minimum wage. That makes sense. The idea of a livable wage to me does not, however. I'm a small business owner and my family and I are by no means making any money off of our hard work. I do 70 hrs a week and my 66 year old mom does about 30, and she works for no pay so we can survive. I make a decent salary but it's not much- I could prob make more being a chef for big companies like I was before this.

I just know that the kids and people I hire don't expect a livable wage working here at a bakery, and they never will. They know that working here or flipping burgers or making subway melts isn't going to pay a livable wage, nor should it.

I feel responsible for my employees well being and make sure I do everything in my power to keep them happy, but if I had to pay $15 an hour minimum I know I would lay off a few people to survive.

This is the same dilemma we're in- definitely pro living wage for people who depend on it and equal pay for men and women but small businesses generally cannot afford to pay $15 to a high school or college aged employee or retiree on a fixed income looking to make some money. There needs to be a clause that accounts for this. A minimum wage that applies straight across the board means small business owners will hire fewer students or retirees on a fixed income (my wife hires both but may not be able to in the future* ) and more and more of them will close (this is already happening). That's not fair for the small business owner, and not fair for the student or retiree on a fixed income. There needs to be some flexibility on this issue for small businesses. The other option is to do away with small businesses and just have corporate everything. Say goodbye to your local independent bakery, pub, bookstore, record store, etc.

*(I run my own small business by myself and see no retirement ever but that's OK with me as I'm OK with working until I drop dead but not everyone is that crazy, LOL!)

ldent42

brianlux said:

RoleModelsinBlood31 said:

I'm for raising the minimum wage. That makes sense. The idea of a livable wage to me does not, however. I'm a small business owner and my family and I are by no means making any money off of our hard work. I do 70 hrs a week and my 66 year old mom does about 30, and she works for no pay so we can survive. I make a decent salary but it's not much- I could prob make more being a chef for big companies like I was before this.

I just know that the kids and people I hire don't expect a livable wage working here at a bakery, and they never will. They know that working here or flipping burgers or making subway melts isn't going to pay a livable wage, nor should it.

I feel responsible for my employees well being and make sure I do everything in my power to keep them happy, but if I had to pay $15 an hour minimum I know I would lay off a few people to survive.

This is the same dilemma we're in- definitely pro living wage for people who depend on it and equal pay for men and women but small businesses generally cannot afford to pay $15 to a high school or college aged employee or retiree on a fixed income looking to make some money. There needs to be a clause that accounts for this. A minimum wage that applies straight across the board means small business owners will hire fewer students or retirees on a fixed income (my wife hires both but may not be able to in the future* ) and more and more of them will close (this is already happening). That's not fair for the small business owner, and not fair for the student or retiree on a fixed income. There needs to be some flexibility on this issue for small businesses. The other option is to do away with small businesses and just have corporate everything. Say goodbye to your local independent bakery, pub, bookstore, record store, etc.

*(I run my own small business by myself and see no retirement ever but that's OK with me as I'm OK with working until I drop dead but not everyone is that crazy, LOL!)

I already did

brianlux

ldent42 said:

brianlux said:

RoleModelsinBlood31 said:

I'm for raising the minimum wage. That makes sense. The idea of a livable wage to me does not, however. I'm a small business owner and my family and I are by no means making any money off of our hard work. I do 70 hrs a week and my 66 year old mom does about 30, and she works for no pay so we can survive. I make a decent salary but it's not much- I could prob make more being a chef for big companies like I was before this.

I just know that the kids and people I hire don't expect a livable wage working here at a bakery, and they never will. They know that working here or flipping burgers or making subway melts isn't going to pay a livable wage, nor should it.

I feel responsible for my employees well being and make sure I do everything in my power to keep them happy, but if I had to pay $15 an hour minimum I know I would lay off a few people to survive.

This is the same dilemma we're in- definitely pro living wage for people who depend on it and equal pay for men and women but small businesses generally cannot afford to pay $15 to a high school or college aged employee or retiree on a fixed income looking to make some money. There needs to be a clause that accounts for this. A minimum wage that applies straight across the board means small business owners will hire fewer students or retirees on a fixed income (my wife hires both but may not be able to in the future* ) and more and more of them will close (this is already happening). That's not fair for the small business owner, and not fair for the student or retiree on a fixed income. There needs to be some flexibility on this issue for small businesses. The other option is to do away with small businesses and just have corporate everything. Say goodbye to your local independent bakery, pub, bookstore, record store, etc.

*(I run my own small business by myself and see no retirement ever but that's OK with me as I'm OK with working until I drop dead but not everyone is that crazy, LOL!)

I already did

So sorry! Do I remember correctly that you're hoping to open a new business?

HughFreakingDillon

as a guy who has very little post secondary education, and doesn't make much money, I take exception to the idea of the minimum wage being as high as $15 per hour. that's ludicrous. it will kill small and even medium size businesses at the same time as almost encouraging people to become complacent about furthering their career goals and ultimately fighting for jobs flipping burgers. that doesn't repair or build an economy.

lukin2006

HughFreakingDillon said:

as a guy who has very little post secondary education, and doesn't make much money, I take exception to the idea of the minimum wage being as high as $15 per hour. that's ludicrous. it will kill small and even medium size businesses at the same time as almost encouraging people to become complacent about furthering their career goals and ultimately fighting for jobs flipping burgers. that doesn't repair or build an economy.

Minimum wage jobs used to be considered entry level jobs/gain work experience as a way for the young person...now many people's have lost their good paying manufacturing/resource sector jobs and more and more people are relying on minimum wage jobs, unfortunately. Personally The only way to break the cycle of going from 1 minimum wage job to other minimum wage jobs is through education...and I believe Canada's education system lacks the proper tools to insure the most amount of young people are getting the necessary tools needed before leaving high school...the trades in this country are severely lacking qualified/trained people but many of the schools no longer off much in the way of tech courses...just my opinion.

Why does Switzerland have one of the lowest youth unemployment rates...educating the young/helping them getting trades...etc.

http://www.cbc.ca/doczone/episodes/generation-jobless

oftenreading

I think we have had more than one minimum wage thread on AMT but this seemed to be the one most recently commented in.  Two new studies looking at the potential results of the minimum wage  hike in Seattle, and the results are mixed. Some researchers claim that the effects of the hike are confounded or washed out by the effects of a hot labour market in Seattle.

https://www.nytimes.com/2017/06/26/business/economy/seattle-minimum-wage.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region&region=top-news&WT.nav=top-news

rgambs

Small businesses are almost always exempt from onerous minimum wage rules.

pjhawks

it's very interesting to me to hear some of the small business owners here take on the minimum wage. i think for sure it needs to be raised but there have been some good points raised here regarding small businesses.  it has me re-thinking that it should be at $15.00.  I'm not sure now. maybe some kind of medium? it has to be higher than it currently is.

CM189191

Basic Living Wage / Guaranteed Minimum Income / Universal Basic Income would solve a lot of these issues.  And you get to scrap minimum wage laws, earned income tax credits, welfare programs, food stamps, housing assistance, tax deductions, and all the rest.

We as a country have the GDP to provide a roof, sustenance and health care to every man, woman and child; with plenty left over for the free market to battle over.  

oftenreading

It comments in the article that small businesses and larger businesses that provide health care to employees were partially exempt from the mandated minimums, but doesn't give details. 

Sorry for choosing the Small Business thread - I just chose the most recent one dealing with minimum wage, but it's not the most applicable one to this article.