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Passthrough Go Collect 200 Dollars… Tax Exempt.

A new form of company has arisen. “Passthrough” companies which do not retain much in the way of earnings and pay out almost all of it in dividends enjoy several perks. Not being considered a c corporation means that they do not pay corporate income tax. These new firms are viewed as loopholes in the tax code but have been around since 1975. By constantly paying out dividends and taking on debt and new investment. Due to earnings payouts, these corporations do not guarantee the same rights that c corporations are required to provide by law. One problem that may soon be solved for passthrough companies is that not everyone can invest in them. This means that passthrough companies and investors aren’t getting the best rates possible in the market. 2/3rds of new businesses are passthrough in structure.

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One Comment

  1. winn winn

    Is this company structure a bad thing? Averting taxes is a way for companies to increase profits. This may help ensure long-term success and employment, which may be more socially beneficial than taxes.

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