Rob......a little FYI. $250,000 a year isn't alot of of money for a contracting business. As I have said before, the profit margin on that GROSS amount might be about 18% at best, that's about $45000. if the business is ran right, approximatly 25-30% should be re-invested back into the business for growth, he's taking home about $33,000. Rob, that's $250,000 in SALES not profit. Now he would be getting taxed on the $33k.
DO THE MATH. Rob, I know how the contracting business works backwards and forwards.
Meaning you should know the difference between gross sales and profit. Sorry if I offended you. For him to even make a $130,000k he would have to do a million in sales on which he gets taxed, then he gets taxed on personal income. Yes, he WILL get taxed up the ass. He would have to do almost $3mil in SALES to come close to $250,000 in profit.
WTF? Joe I'm not an MBA but I do contract. Tax is levied on gross profit, not gross sales (as I'm sure you know, but that last post was a little vague). Also, overhead, insurance costs, materials supplied, etc, varies vastly between industries and trades, and even within a single trade depending on how the guy wants to run it, so there's no way to say what percentage of gross sales is profit. Last, a director can choose his salary and tax liability, or engage a trust to take franked dividends from the company's net, but the money doesn't get double taxed - either the company claims the deduction as payroll and the individual pays the tax, or the company pays the tax and issues a franked dividend at the director's discrecion.. If you're paying tax twice on the same money, shoot your accountant.
I'm sure you know the fitness contracting business inside and out, but there are lots of kinds of contracting, from ditch digging to hyperspecialized expert consulting. No one can be an expert on all of these.
