Blue Eyed Beauty Supply is the talk of the town. When Elaine started her business, she had no idea it would evolve to be the number one supplier of cosmetology supply in the region. While her business has been successfully operating as a sole proprietorship for many years, her legal counsel has urged her to form a separate legal entity for a variety of nontax reasons. Elaine will form an LLC but has come to you for advice as to which tax classification is best positioned to pay the least overall tax. She has provided you with her $2022$ tax data and the following assumptions to develop an Excel model:

$$ Elaine is Single and her sole source of income is from her business activities

$$ It is expected that her business meets the definition of a trade or business for Qualified Business Income deduction purposes

$$ The business generates $$140,000$ of net income before contemplating any taxes

$$ Elaine is assuming a reasonable compensation amount of $$50,000$

$$ As a C Corporation, the business will dividend out all earnings after taxes are paid to ESchedule X $-$ Single

If taxable income is over: But not over: The tax is: Plus:

$$-$ $$11,000\mathrm{.}00$ $$-10\%$

$$11,000\mathrm{.}00$ $$44,725\mathrm{.}00$ $$1,100\mathrm{.}0012\%$

$$44,725\mathrm{.}00$ $$95,375\mathrm{.}00$ $$5,367\mathrm{.}0022\%$

$$95,375\mathrm{.}00$ $$182,100\mathrm{.}00$ $$20,982\mathrm{.}5024\%$

$$182,100\mathrm{.}00$ $$231,250\mathrm{.}00$ $$43,704\mathrm{.}0032\%$

$$231,250\mathrm{.}00$ $$578,125\mathrm{.}00$ $$74,000\mathrm{.}0035\%$

$$578,125\mathrm{.}00$ $$-$ $$202,343\mathrm{.}7537\%$

Schedule C

Schedule C Income $$150,000\mathrm{.}00$

Self$-$Employment Tax $$22,950\mathrm{.}00$

Less: $50\%$ Self$-$Employment Tax

AGI

Less: Standard Deduction $$13,850\mathrm{.}00$

Less: QBI $($HINT: Use a MIN function to apply the taxable income limitation$)$

Taxable Income:

If taxable income is over:

But not over:

The tax is:

Plus tax percentage:

Plus tax amount:

Ordinary Personal Income Tax

Overall Total Tax

Overall Tax Rate

S Corporation

W$-2$ Income $$55,000$

Less: Employee Share of Payroll Taxes

Net W$-2$ Compensation

S Corporation Income Before Payroll Tax $$95,000$

Less: S Corporation Payroll Tax $$4,207\mathrm{.}50$

Other Income $-$ S Corp K$-1$ $$90,792\mathrm{.}50$

AGI

Less: Standard Deduction $$13,850\mathrm{.}00$

Less: QBI $($HINT: Use a MIN function to apply the taxable income limitation$)$

Taxable Income:

If taxable income is over:

But not over:

The tax is:

Plus tax percentage:

Plus tax amount:

Ordinary Personal Income Tax

Overall Total Tax

Overall Tax Rate

C Corporation

W$-2$ Income

Less: Employee Share of Payroll Taxes

Net W$-2$ Compensation

C Corporation Income Before Payroll Tax

Less: C Corporation Payroll Tax

C Corporation Taxable Income

C Corporation Income Tax

AGI

Less: Standard Deduction $$13,850\mathrm{.}00$

Taxable Income

If taxable income is over:

But not over:

The tax is:

Plus tax percentage:

Plus tax amount:

Ordinary Personal Income Tax

Dividend From C Corporation

Qualified Dividends Tax $($HINT: Some dividends may be taxed at $0\%)$

Total Personal Tax

Overall Total Tax

Overall Tax Ratelaine