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Originally Posted by athletics
Remember if you are self employed, you pay twice the Social Security tax. So thats 6.2 twice for 12.4 %. Ouch!
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Only under certain incorporation methods. True small businesses are mostly filled as S-Corporations, or similar LLC structures. The income passes directly from corporation to the owner, with no taxation. The income is reported just like a salary, and taxed accordingly. For this not to be applicable, there have to be a considerable number of employees, or if the corp is publically traded. Your example is disingenous at best...the information provided misleads more than it informs.