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Reasonable Compensation

This is it. New Hampshire is finally telling the country that we are closed for business. At least small businesses. The excuse of closing the loophole on taxation or equalizing the playing field has just become a farce. There is a smoking gun facing small business owners and it is in the hand of our Governor, our Legislators and the people who work for them.

While business owners wrestle with the worst recession of our lives, worrying about how to survive in an environment with 50,000 New Hampshire residents unemployed and hundreds of thousands under employed, the state of New Hampshire has been trying to impose a Small Business Income Tax of 13.5%. Little did we know that this was, in part, just cover for a new level of small business taxes to bury any hope of employment or economic recovery.

To solidify the new Small Business Income Tax known as the LLC Interest and Dividends Tax, Representative Susan Almy from Lebanon, at the bequest of the Department of Revenue Administration has introduced a new Bill that re-establishes how much money a small business owner can make. And boy, do they have blood on their hands.

As many know, the DRA has for years, possessed the ability to determine “Reasonable Compensation” for companies in New Hampshire. Recently they have become very aggressive in applying that standard to owners of LLC’s, Partnerships and Professional Associations. That being, if the State determines you have over compensated yourself, you have to restate your earnings, which results in a 13.5% new tax on both your small company and your personal income. This new Bill (HB 1607) creates several new job killng, economic destroying conditions on small businesses. And not to be exclusive, these new rules will apply to sole proprietorships too.

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