Entity Choice for the Entrepreneur Dlue-Eyed Beaufy 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 products in the region. While her business has been successfully operating as a sole proprietotship for many years, her legal counsel has urged her to form a separate legat entity for a variety of nontax reasons. Elaine has come to you for advice on the tax implications of her deckion You have loaded her 2021 tax data. based upon provided assumptions, into a model based on the following facts: - 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 buriness for Quaified furiness income deduction purposes. - Given her executive responsibilities, elaine is assuming a ressonable compensation amount of $100,000 - As a C Corporation, the business will pay out all earnings after taxes are paid to Elarre Elatne Wants to minimite her overall tax burden while protecting her assets. Elue Eyed Beauty Supipy is in an industry erjoying a peiod of growth and investment. and Elaine wants to grow her business to take advantage of the expanding market. Using 2021 income tax rules. you heve created the following Tasieau visua ization for the current tax year to heip Elaine make a decision. Mouse over the graphs to reveal specific amounts for use in answering the followng questions Tax Dollars = a. How much total tax does Elaine pay currently as a sole proprietorship? b. How much less Employment tax will Elaine pay if she incorporates and makes a timely S election as opposed to a sole proprieforship? c. How much of the business income will be issued to Elaine as a dividend under the C Corporation scenario? d. What is the Corporate-level tax due if she does not make an S Corporation election? e. Which option provides Elaine with the lowest overall tax? Entity Choice for the Entrepreneur Dlue-Eyed Beaufy 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 products in the region. While her business has been successfully operating as a sole proprietotship for many years, her legal counsel has urged her to form a separate legat entity for a variety of nontax reasons. Elaine has come to you for advice on the tax implications of her deckion You have loaded her 2021 tax data. based upon provided assumptions, into a model based on the following facts: - 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 buriness for Quaified furiness income deduction purposes. - Given her executive responsibilities, elaine is assuming a ressonable compensation amount of $100,000 - As a C Corporation, the business will pay out all earnings after taxes are paid to Elarre Elatne Wants to minimite her overall tax burden while protecting her assets. Elue Eyed Beauty Supipy is in an industry erjoying a peiod of growth and investment. and Elaine wants to grow her business to take advantage of the expanding market. Using 2021 income tax rules. you heve created the following Tasieau visua ization for the current tax year to heip Elaine make a decision. Mouse over the graphs to reveal specific amounts for use in answering the followng questions Tax Dollars = a. How much total tax does Elaine pay currently as a sole proprietorship? b. How much less Employment tax will Elaine pay if she incorporates and makes a timely S election as opposed to a sole proprieforship? c. How much of the business income will be issued to Elaine as a dividend under the C Corporation scenario? d. What is the Corporate-level tax due if she does not make an S Corporation election? e. Which option provides Elaine with the lowest overall tax
