| You are correct that taxes would be owed on $100k of personal income. This may be less than the expected saving from avoiding corporate income tax due to: - Tax free personal allowance (soon to be $15k for the UK). - Tiered rates of personal income tax (for example a 10% lower band up to a threshold). - Deductions or grants for persons working in enterprise zones/for small companies/for start ups/for technology companies/in strategic industries which are only reclaimable once personal income crosses a threshold. (Common in places like Northern Ireland.) - Employees and employers not in the same tax region, allowing for {evasion|avoidance} schemes. The whole thing gets really complicated very quickly, and if your two man startup is engaged in tax manipulation to that level you are probably missing the forest for the trees. If a $20k tax saving distracts you from a shot at a $1bn market you are doing it wrong. (Unless you know a huge check is arriving next quarter, or some other special circumstance applies.) |