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Comment by winter_blue | Hacker News Reader

Startups and small businesses in the United States organized as "S corporations" also pay zero taxes, and the qualification rules are a lot more permissive.

To be a United States S corp the rules are:

1) Number of shareholders <= 100

2) All shareholders are humans and U.S. residents

3) There is only one class of stock

For more, see: https://en.wikipedia.org/wiki/S_corporation

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> Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.

That's not what I imagine when reading "zero taxes".

Yeah, that's just "taxes".

Exactly. Everyone is still taxed, is just a question of accounting as to who and how you get taxed. To say U.S. corps are zero-taxed is quite misleading.

Normally, with a C-Corp, there's double taxation. The company pays taxes on the profit, and then shareholders pay taxes on the dividends they receive. But what the shareholder pays is effective his individual tax -- not corporate.

And, I'm guessing Albania has individual income tax. Also, I'm pretty sure most of those countries with low or zero corporate taxes have individual income taxes.

>> Startups and small businesses in the United States organized as "S corporations" also pay zero taxes

This is a misleading statement. S corporations are pass-through entities. In other words, all profits they make get passed through to their shareholders as income, who then pay taxes on their personal tax returns at their personal income tax rates. So technically the S corp is paying zero taxes, but only because they're being paid elsewhere by the owners.

Wouldn't the owners/shareholders of companies in countries with low/zero corporate taxes still have to pay taxes on their individual income?

So how would this (S Corp) be different from what Albania is offering?

I am not familiar with Albanian tax laws, so I can't answer that. I would imagine they are not offering pass-through entities though, since those just shift the point of taxation, not remove it.

"shift the point of taxation" implies that there is only 1 point of taxation. That's wrong. With regular corporations, there are 2 points of taxation: the owner/shareholder, the corporation. S Corps eliminate the 2nd point of taxation. It doesn't simply "shift" the tax burden, it eliminates an entire additional class of taxes.

>2) All shareholders are humans

i assume individuals (?)

Yup individuals. The shareholders can't be companies.

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