December 3, 2019 Maloney, Raabe, Young, Nellen, & Hoffman, CPAs 5191 Natorp Boulevard Mason, OH 45040. Mr. Robert Benton 1121 Monroe Street Ironton, OH 45638 Dear Mr. Benton: This letter is in response to your inquiry as to the tax effects of incorporating your business in 2019. I have analyzed the tax results under both assumptions, proprietorship and corporation. I cannot give you a recommendation until we discuss the matter further and you provide me with some additional information. My analysis based on information you have given me to date is presented below. Computation 1 Total tax on $150,000 if you continue as a proprietorship 150,000 X Total tax if you incorporate: Individual tax on $100,000 salary 18,174.50 X Corporate tax on taxable income Total 10,500 28,674.50 X Although this analysis appears to favor incorporating it is important to consider that there will be additional tax on of income left in the corporation if you withdraw that amount as a dividend in the future, as calculated the S below. Computation 2 After-tax income left in corporation Tax on after-tax income Total tax paid if you incorporate 21,325.50 X S 5,118.12 X 33,792.62 X incorporating. If you incorporate and recover the income left in Comparison of computations 1 and 2 appears to support the corporation as long-term capital gain from a sale of stock in the future, the total tax cost of incorporating will be the same, as shown in computation 3 below. Computation 3 After-tax income left in corporation 21,325.50 x Tax on after-tax income 3,198.82 Total tax paid if you incorporate 31,873.32 X In summary, incorporation appears to be the more attractive option. However, there are important nontax considerations with respect to this decision. We can discuss those issues at our next meeting. Thank you for consulting my firm on this important decision. We are pleased to provide analyses that will help you make the right choice.