1. Dave and Cindy, who want to start a law firm, each have $1,000 to invest in the business and no personal assets and want limited liability protection and only 1 level of taxation. They want your advice on whether they should form their law firm as: 1) a general partnership; or 2) a limited liability corp (LLC) What business entity would you recommend? Why?

2. Karen, who is setting up a new business, expects that her new business income in the first year will be $10,000. If the business is a C (regular) corporation assume it has distributed $5,000 of its $10,000 income to Karen as a dividend. Corps income tax rate is 35%. Karens income tax rate is 30% and her dividend tax rate is 20%. For federal income tax purposes, how much would be the income taxes paid on her business projected income if Karens business was a C (regular) corporation or was a sole proprietorship?