Fluketronix...

[Sridhar Ayengar]

J Blaser wrote:
>>>> 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.

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?

Peace...  Sridhar