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To: J_F_Shepard who wrote (298107)	9/19/2002 8:30:28 AM
From: Bill	Respond to of 769667

Let's say you open a lemonade stand in front of your house and sell $30,000 of lemonade in a year. You spend $5,000 in supplies and pay yourself $15,000 including payroll taxes. This leaves you $10,000 profit, which you intend to keep in the company in case you wanted to invest in expansion. IRS comes along and taxes you $1,500 on that profit, leaving your company with $8,500. The following year, you decide to close the business. When you do, that $8,500 is taxable as a dividend to you - even though you've already paid income tax on it. Double taxation. So, to avoid those kinds of situations, many small business owners manage the bottom line to zero, taking the profit as salary (or expending it otherwise) so that they are taxed only once on it. BUT each state has a minimum income tax for a business which ranges from $400 to $800 regardless of whether a profit was made. That's why Srexley manages his business to zero and pays the $800 minimum income tax.