LO3,4 Colleen, Rosemary, and Suzanne own a software development firm. Colleen owns 45% of the business, Rosemary 30%, and Suzanne 25%. The net operating income from the business is $220,000. Assume Suzanne is paid a salary of $45,000.

For each of the following situations, determine who is responsible for paying the Social Security and self-employment taxes on the income from the business and who is allowed a deduction for the Social Security and self-employment taxes paid:

a. The business is formed as a partnership. Suzanne’s salary is not a guaranteed payment.

b. The business is formed as a corporation.

c. The business is formed as an S corporation.

Communication Skills