If I pay taxes on my earnings, would someone also pay taxes on the same earnings if I subcontract them and pay a share?
If you want to subcontract some of your excess work to somebody else, you better be in business!  While some kinds of employees (e.g. commissioned salespeople) are permitted to deduct some expenses on their income tax, generally only a real business can deduct wages for additional employees, or the cost of services provided by subcontractors. Do you invoice your clients and charge HST (GST)?  Or do you tell your clients each pay period how many hours you worked and they compensate you through their payroll system like everybody else that walks through the door?  If you're not invoicing and charging HST (GST) (assuming you exceed the threshold, and if you have too much work, you probably do!), then perhaps your clients are treating you as an employee – by default – and withholding taxes, CPP, and EI so they don't get in trouble? After all, Canada Revenue Agency is likely to consider any person providing a service to a company to be an employee unless there is sufficient evidence to the contrary, and when there isn't enough evidence, it's the company paying for the services that would be on the hook for unpaid taxes, CPP, and EI. Carefully consider what form of business you are operating, or were intending to operate.  It's essential for your business to be structured appropriately if you want to hire or subcontract.  You ought to be either self-employed as a sole proprietor, or perhaps incorporated if it makes more sense to your situation.  Next, act accordingly. For instance, it's likely that your business should be taking care of the source deductions, CPP, and EI.  In fact, self-employed individuals shouldn't even be paying into EI – an independent contractor wouldn't qualify to make an EI claim if they lost a contract. As an independent, one doesn't have a job, one has a business, and EI doesn't cover the business itself, only the employees that the business deals with at arm's length.  As a business owner, you would be considered non-arms-length, and exempt from EI. Growing your business in the way that you are suggesting is an important enough a step that you should seek professional advice in advance.  Find a good accountant that deals with self-employed individuals & small businesses and run all this by him.  He should be able to guide you accordingly.  Find a lawyer, too.  A lawyer can guide you on how to properly subcontract others while protecting you and your business. Finally, be mindful of what it is you agreed to in your contract with your client:  Do they expect all services to be performed by you, personally?  Even if it wasn't written down who exactly would be performing the services, there may be an assumption it's you.  Some negotiation may be in order if you want to use subcontractors.
You tagged with S-Corp, so I assume that you have that tax status.  Under that situation, you don't get taxed on distributions regardless of what you call them.  You get taxed on the portion of the net income that is attributable to you through the Schedule K that the S-Corp should distribute to you when the S-Corp files its tax return.  You get taxed on that income whether or not it's distributed. If you also work for the small business, then you need to pay yourself a reasonable wage.  The amount that you distribute can be one factor in determining reasonableness.  That doesn't seem to be what you asked, but it is something to consider. There are too many nuances to the question asked to explore fully but here are a few points to keep in mind. If you are a cash-basis taxpayer (most individuals are), then you are not required to pay taxes on the money that has been billed but not received as yet.  If you operate on an accrual basis, then the income accrues to you the day you perform the service and not on the day you bill the client. You can make four equal payments of estimated tax on the due dates, and if these (together with any income tax withholding from wage-paying jobs) are at least 90% of your tax liability for that year, then you owe no penalties for underpayment of tax regardless of how your income varied over the year. If your income does vary considerably over the year (even for people who only have wages but who invest in mutual funds, the income can  vary quite a bit since mutual funds typically declare dividends and capital gains in December), then you can pay different amounts in each quarterly installment of estimated tax. This is called the annualization method (a part of Form 2210 that is best avoided unless you really need to use it).  Your annualized income for the payment due on June 15 is 2.4 = 12/5 times your taxable income through May 31. Thus, on Form 2210, you are allowed to assume that your average monthly taxable income  through May 31 will continue for the rest of the year. You then compute the tax due on that annualized income and you are supposed to have paid at least 45% of that amount by June 15. Similarly for September 15 for which you look at income through August 31, you use a multiplier of 1.5 = 12/8 and need to pay 67.5% of the tax on the annualized income, and so on.  If you miscalculate these numbers and pay too little tax in any installment, then you owe penalties for that quarter.  Most people find that guesstimating the tax due for the entire year and paying it in equal installments is simpler than keeping track of nuances of the annualized method. Even simpler is to pay 100% of last year's tax in four equal installments (110% for high earners) and then no penalty is due at all. If your business is really taking off and your income is going to be substantially higher in one year, then this 100%/110% of last year's tax deal could allow you to postpone a significant chunk of your tax bill till April 15. S-Corp income is passed through to owners and is taxed on their 1040 as ordinary income. If you take a wage (pay FICA) and then take additional distributions these are not subject to FICA.  A lot of business owners will buy up supplies/ necessary expenses right before the end of the tax year to lower their tax liability. I am probably not the most qualified person, but I have taken some managerial finance courses.  If company B is still in tact, has its own documentation saying it's a company and all that, the only income company A would need to claim from B is that which B profited and the profits were given to A.  I see the above scenario similar to owning an asset, like a bond, which pays you interest.  If the companies are merged, most definitely but that probably wasn't your question. Nope pay the employer back the due does not involve any tax. Just keep a record of the transaction so that its available as reference. When you do your tax return, your total income from the year from all sources is added up. So you will need to include your employment income as well as your contractor income. Any tax taken off at source through PAYE will then be deducted from how there is to pay. So whether you pay the tax or your employer pays it, it should end up the same, although the timing will differ. There will be differences in National Insurance treatment, and you don't necessarily have a free option to choose which happens - the nature of your relationship may mean you have to be classed as either employed or self-employed under HMRC rules. Unfortunately, no.  Think about the numbers. If you work for me, and I pay you $1000, you owe tax on $1000. If you still work, but I don't pay you, you have no tax due, but there's no benefit for you to collect for my stealing your time. "From the IRS page on Estimated Taxes (emphasis added): Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. I think that is crystal clear that you're paying income tax as well as self-employment tax. To expand a bit, you seem to be confusing self-employment tax and estimated tax, which are not only two different things, but two different kinds of things.  One is a tax, and the other is just a means of paying your taxes. ""Self-employment tax"" refers to the Social Security and Medicare taxes that you must pay on your self-employment income.  This is an actual tax that you owe.  If you receive a W-2, half of it is ""invisibly"" paid by your employer, and half of it is paid by you in the form of visible deductions on your pay stub.  If you're self-employed, you have to pay all of it explicitly. ""Estimated tax"" does not refer to any actual tax levied on anyone.  A more pedantically correct phrasing would be ""estimated tax payment"".  Estimated taxes are just payments that you make to the IRS to pay tax you expect to owe.  Whether you have to make such payments depends on how much tax you owe and whether you've paid it by other means.  You may need to pay estimated tax even if you're not self-employed, although this would be unusual.  (It could happen, for instance, if you realized large capital gains over the year.)  You also may be self-employed but not need to pay estimated tax (if, for instance, you also have a W-2 job and you reduce your withholding allowances to have extra tax withheld). That said, if you earn significant income from self-employment, you'll likely have to make estimated tax payments.  These are prepayments of the income tax and Social Security/Medicare taxes you accrue based on your self-employment income. As Pete B. mentioned in his answer, a possible reason that your estiamtes are low is because some taxes have already been withheld from the paychecks you received so far during the year (while you were an employee).  These represent tax payments you've already made; you don't need to pay that money a second time, but you may need to make estimated tax payments for your income going forward." "OK, it's a bit of a minefield but here goes! You only pay corporation tax in the UK on any profit made, so your ""salary"" would not be classed as part of the profit, so in the example you give you would only pay corporation tax on £4k less your ""salary"" ie £3,200 so profit on the £800 remaining gross profit. You don't say if your figures are monthly, annual etc, but you only pay income tax if you earn over £11.5k in any given tax year, the rates increase as your income does, check here:  https://www.gov.uk/income-tax-rates You may have a different tax code, you would need to check that with HMRC but the link gives the ""default"" position which is correct for most people. https://www.itcontracting.com/limited-company-dividends/ If the figures you give are monthly then I would consult an accountant as they are likely to save you more than they will charge for their services. You will probably find it is most tax efficient to pay yourself a dividend from the company's profits but check with an accountant. More info: https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limited-company" Note that you're asking about withholding, not about taxing.  Withholding doesn't mean this is exactly the tax you'll pay: it means they're withholding a certain amount to make sure you pay taxes on it, but the tax bill at the end of the year is the same regardless of how you choose to do the withholding.  Your tax bill may be higher or lower than the withholding amount. As far as tax rate, that will be the same regardless - you're just moving the money from one place to the other.   The only difference would be that your tax is based on total shares under the plan - meaning that if you buy 1k shares, for example, at $10, so $1,500 discounted income, if you go the payroll route you get (say) $375 withheld.  If you go the share route, you either get $375 worth of stock (so 38 shares) withheld (and then you would lose out on selling that stock, meaning you don't get quite as much out of it at the end) or you would ask them to actually buy rather more shares to make up for it, meaning you'd have a slightly higher total gain.  That would involve a slightly higher tax at the end of it, of course. Option 1:  Buy and then sell $10000 worth, share-based withholding.  Assuming 15% profit, and $10/share at both points, then buy/sell 1000 shares, $1500 in profit to take into account, 38 shares' worth (=$380) withheld.  You put in $8500, you get back $9620, net $1120.   Option 2:  Buy and then sell $13500 worth, share based withholding.  Same assumptions.  You make about $2000 in pre-tax profit, meaning you owe about $500 in tax withholding.  Put in $11475, get back $13000, net $1525.  Owe 35% more tax at the end of the year, but you have the full $1500 to spend on whatever you are doing with it. Option 3:  Buy and then sell $1000 worth, paycheck withholding.  You get the full $10000-$8500 = $1500 up front, but your next paycheck is $375 lighter.  Same taxes as Option 1 at the end of the year. "Do you mean how much income tax the IRS will assess? Loans are not income, therefore they do not incur income tax. So as long as the money isn't being given, but being loaned, you don't have to pay income tax on it. And just in case you think there's a loophole of ""Instead of paying my workers, I'll just 'loan' them their paychecks, and then forgive the debt at the end of the year"", no, the IRS does consider loan forgiveness to be a form of income. So you need to look at whether the loan is going to you, or whether your business is a separate legal entity that is getting the money. If it's a capital contribution, then you are selling a stake in your company. Or, more precisely, as long as the money is going into the business, the company is selling a stake in itself. In that case, there generally isn't tax owed. Here's a Quara question that touches on this: https://www.quora.com/Is-money-raised-through-investors-taxed" As JoeTaxpayer has mentioned, please consult a lawyer and CA.  In general you would have to pay tax on the profit you make, in the example on this 10% you make less of any expenses to run the business. depending on how you are incorporating the business, there would be an element of service tax apart from corporate tax or income tax. If you have a public company and shareholder A owns 25% and shareholder B owns 25%, and lets say the remaining 50% is owned by various funds/small investors.   Say profits are 100mil, and a dividend is payed. Say 50 mil worth is payed out as dividend and 30 mil is kept as retained earnings for future investment. Can the remaining 20 mil be distributed to shareholders A and B, so that they both get 10mil each? Can certain shareholders be favored and get a bigger cut of profits than the dividends pay out is my question basically. Do you have any insight on average *effective* rates paid by SE owners?  As a counterpoint to your (very valid) links, filing as S-corp allows for taxes on distributions to be exempt from payroll tax and taxed at much lower rates. Also, being SE allows for various deductions not possible for wage earners. There's probably other examples not immediately coming to mind.  Also, SE taxes equal taxes otherwise paid by employer + employee. It's just that those employer taxes don't appear on the employee's paystub so not everyone realizes this. "Assuming you are paying into and eligible to collect regular Employment Insurance benefits for the job in question, I don't see how owning a side business would, by itself, affect your ability to participate in the workshare program.  Many people own dormant businesses ($0 revenue / $0 income), or businesses with insignificant net income (e.g. a small table at the flea market, or a fledgling web-site with up-front costs and no ad revenue, yet ;-) I think what matters is if your side business generated income substantial enough to put you over a certain threshold. Then you may be required to repay a portion of the EI benefits received through the workshare program.  On this issue, I found the following article informative: How to make work-sharing work for you, from the Globe & Mail's Report on Business site.  Here's a relevant quote: ""[...] If you work elsewhere during   the agreement, and earn more than an   amount equal to 40% of your weekly   benefit rate, that amount shall be   deducted from your work sharing   benefits payable that week. [...]"" The definitive source for information on the workshare program is the Service Canada web site.  In particular, see the Work-Sharing Applicant Guide, which discusses eligibility criteria.  Section IV confirms the Globe article's statement above: ""[...] Earnings received in any week   by a Work-Sharing participant, from   sources other than Work-Sharing   employment, that are in excess of an   amount equal to 40% or $75 (whichever   is greater) of the participant's   weekly benefit rate, shall be deducted   from the Work-Sharing benefits payable   in that week. [...]"" Finally, here's one more interesting article that discusses the workshare program: Canada: Employment Law @ Gowlings - March 30, 2009."