Is a business that brings in $100 billion and employs 50,000+ people around the world a small business? Mitt Romney & Paul Ryan think so. That's because, according to Romney & Ryan, any business - no matter its size or its revenue - is a small business so long as the business' income is "passed through" to its owners and therefore taxed as income on the business owner's personal income tax statement. These business do not pay corporate taxes, and therefore - according to Romney & Ryan - they are small.
The real kicker is that many of these small business have "Inc." at the end of their names, which tends to lead to the erroneous conclusion that the business pays corporate taxes and is therefore not small according to Romney & Ryan. Turns out, you can be a large corporation and a small business at the same time. Take for instance, the small business mentioned earlier - the one with $100 billion in revenue and 50,000+ employees. It has a name: Koch Industries, Inc. It's the second largest privately held business in the United States.
Koch Industries, Inc., is an S-Corporation. It's one of the two types of corporations that we have in the United States: S & C. C-Corporations, like Apple & Facebook, are subject to double taxation - meaning, these businesses pay state and federal corporate tax, and then their shareholders pay taxes if, and when, dividends are issued. One of our commenters, VClib, correctly noted, "Many corporations ... have never paid dividends and so their shareholders have not been subject to double taxation. Shareholders of C corporations don't pay an income tax unless there is a dividend declared or they sell their appreciated stock, at which time they would owe a capital gains tax." C-corporations are not small businesses according to Romney & Ryan.
But an S-Corporation, on the other hand, is a corporation that elects to be treated as a pass-through entity (like a sole proprietorship or partnership) for tax purposes. Since all corporate income is "passed through" directly to the shareholders who include the income on their individual tax returns, S-Corporations are not subject to double taxation. Therefore, S-Corporaitons are small businesses according to Romney & Ryan.
So, when you hear Romney & Ryan talk about championing small businesses, remember that they're not just talking about your local florist, doctor's office, or taco stand. They're talking about championing their friends' small businesses, like Charles and David Koch.
