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Comment by stevedewald | Hacker News Reader

Yes, after paying salaries, owner distributions, etc. There isn’t much incentive for small businesses in the US to keep excess cash in the company.

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Also there is the liability disincentive. If you have cash in the company, then it's an asset of the company that can be taken via lawsuit. If that cash is paid out to shareholders via dividends, then there is no company cash to be seized via lawsuits.

Silly question but I think a valid one. Do small businesses include contractors? In the UK contractors are required to form a Ltd, thus all incoming is also outgoing (tax, VAT, salary, dividend, expenses)

If that is the case, the $7 make sense. I only leave a small capital in my company £5-7k for expenses/surprises by HMRC (aka IRS).

>In the UK contractors are required to form a Ltd, thus all incoming is also outgoing (tax, VAT, salary, dividend, expenses)

I don't think they're required to do this.. certainly it's possible to work via a brolly. Public sector clients have started asking some contractors to do this post-IR35.

Whilst I know agencies have their own policies on this, do you know of any legal reason why companies wouldn't be able to work with contractors who are self-employed for tax purposes (/instead/ of operating via a Ltd company)?

Obviously in most circumstances it's a really dumb idea to operate as self-employed instead of via a Ltd company.

I've been contracting in the UK for "a while". The last couple of years the gov was pushing the IR35 agenda to increase HMRC revenue, making contractors "super expensive employees without benefits". This year majority of the calls I got were within IR35 (no more Ltd) or Umbrella.

Up until 2019 vast majority of calls/contracts offered to me (in the IT Audit/Risk/Security, GRC areas) were Ltd. I guess large Financial Services companies enjoy the 2mil liability insurance. Because if little-me messes up, their will get jack-shit :) It was also making the "contracting for a project and not an employee" scenario.

Which is one result of near-zero interest rates.

Even in a world of non-zero interest rates, there's little reason to store money in corporate accounts instead of shareholder's.

These are small businesses, though. Presumably nearly all of them have no shareholders (at least not the same way large corporations do).

Uh, no. If the business is a corporation then it has stockholders, and if it's a small business (meaning probably not interested in being a high-growth company) then it's likely letting all of its earnings pass through to the owner(s) as salary and distributions.

All the more reason not to keep cash there. The way US corporate taxes work, if you keep cash year-to-year in the business itself, you get taxed on it - And then you get taxed again when you disburse it to yourself.

Remember this the next time you hear a talking head complaining that corporations pay zero taxes.

Laughs in bankruptcy

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