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Dividends paid by a simple C Corp would be tax deductible by the corporation, but would be taxed towards the shareholders at full ordinary rates, not the lower qualified dividend rate of 20%. Trusting someone is very dangerous, especially a closer relative or long-time co-worker. Remember that this person is out for that money as well as the business. It often works out that might be after your own and firm. Handshakes are a warm old custom, but that's what they may be - a well used custom. Get anything you agree to in writing,
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