16 Oct
2007
16 Oct
'07
1:25 p.m.
J Blaser wrote:
So what exactly is to stop a corporation from writing bylaws that, in
effect, employ each shareholder as a part-time employee who gets paid
their dividend as salary?
Nothing. If that were to be possible for the large-ish corporations out
there, I'm sure that would be a preferred route to take.
Cool.
>> Do
stockholder dividends count against profits?
>>
> I do not know the details, but the idea is to take the profit before
> taxes and either shovel them back into the company in some fashion,
> manage to write them off as some sort of loss, and/or let the
> shareholders take it. It is much easier for individual shareholders to
> shelter themselves from taxes, and isolates the tax liability.
Dividends are paid out AFTER all expenses (including taxes) are
otherwise accounted for. Dividends are paid out of profits, not
revenues, if you get my meaning, since the dividend is a distribution
of 'net income' to the company's owners, that is, the shareholders.
The company first must pay taxes on its gross income, leaving net
income to be distributed to the shareholders according to the
determination of the board of directors.
Dividends, indeed, are a perfect example of double-taxation. Of
course, YOU have to pay taxes, too, on any dividends that you receive
as a shareholder, thus the 'double-taxation' comment. And dividends
are always considered to be short-term returns, thus are taxed at
your normal tax rate.
As was mentioned, a corporation WANTS to minimize income, trying to
shuffle off as much as possible as an expense, thus minimizing the
taxes, and if these 'expenses' are bonuses to employees (including
the CEO, for sure), well then that can be treated as an expense,
before taxes come into the picture. At least bonuses to employees
are only taxed once, as income to the individual. But there is no way that a Mega-, Large-, or even a
Mid-sized
corporation could have thousands of shareholders on the payroll! ;-)
Well, there's a fair amount of administrative overhead dealing with a
publicly traded corporation already. I wonder how big of an increase it
would be to just call the shareholders employees.
Besides, what are you going to have 80-year old Mr.
and Mrs. Doe do for
you if you are a Gulf of Mexico oil exploration outfit? :-o
Nothing except own the shares. It would be the only responsibility of
the job.
Peace... Sridhar