Joann and Bob, both in their mid-40s, are the owners of an employment business. The firm finds temporary employment for students in the college town of Gainesville, Florida. The business has been operated as a two-person partnership for five years. Profits have grown in each of the first five years until the couple earns approximately $200,000 per year excluding the small $30,000 salaries each is drawing from the business. Bobs parents operate a small grocery store in Nebraska and have successfully used the C corporation form for many years. Joann and Bob have not followed the lead of Bobs parents and have continued to use a partnership. The couple has become confused with all of the new business forms- limited liability companies, limited liability partnerships, S corporations, etc.-that people have recommended to them. Bob mentions that he has been taking money out of the business as dividends, but that he is unhappy because the tax cost of withdrawing profits is so high. They have come to your public accounting firm for help in determining if their partnership form of business is the way to operate the business in the future. What strategies can you develop for improving Joann and Bobs personal and business tax positions?

Please make sure you include the refernce and tax code.