Say I am Mike, and I own Mike's Lemonade Stand.
Mike's Lemonade Stand LLC did well this year, and brought in 1 Million Dollars. I must be doing well, the company brought in a MILLION!!! I am going to pay myself monthly payments of $8333.33, because I think I am worth it. After all, I did start a business that contributes to society. That is going to give me a yearly income of 100,000 and the government is going to tax that too. Uncle Sam is going to get 35,000 before the day is done. That is ok though...my company still brought in 900,000. Then there are my employees and general cost of business. Let's assume I am running a 30% margin. That allows for expansion and overall good feelings. So out of the 1 Million my company brought in, about 300,000 of that was profit. Not bad. Uncle Sam will surely want a piece. Now that profit is at 195,000 as Uncle Sam took 35% or $105,000. Ok. We still have 195,000 to build the business with, and that isn't anything to sneeze at. But then again, I did work 80 hour weeks for 3 years, didn't eat for 2 of those, and slept at my desk since I couldn't afford an appartment when I started. I should buy myself a small cottage on the mountain, something to enjoy after all of my efforts, because if I failed, I wouldn't have a damn thing and no one would take care of me. So I take out 100,000 in profits to pay the investors...me. Uncle Sam wants 15,000 from that too. So in the course of the year, my income was taxed, my companies income was taxed, and then when I paid myself for my risk, that got taxed to the tune of $155,000. Not to mention, before I gave myself a risk reward, the pile of money was taxed by the government.
Double Taxation.