Mike and Casey are siblings that have started their own business. When they first created their business, they formed an S Corporation. They are considering changing to a C Corporation and but first want to know the tax implications to each of them individually as well as the corporation.

Mike owns 45% and Casey owns 55% of the business. Mike works full-time at the business and takes a salary of $20,000.

• For 2019, they expect their profits to be $100,000 before paying a salary to Casey.
• They also plan on taking a total distribution of $20,000 (allocated based on ownership percentage)
• For this project, assume that all business transactions are cash transactions.
• All business income of the S Corporation is eligible for Section 199A deduction for Mike and Casey.
• Mike and Casey also have other sources of income, which you will ignore, except that you need to know that Mikes marginal tax rate is 12% and Caseys marginal tax rate is 35%.
• You can ignore all self-employment taxes.

Corporations:

	S Corporation	C Corporation
What is the taxable income of the corporation?
What is the tax?
What is the cash available to corporation from profits after paying taxes and distributions/dividends?

Conclusion:

	S Corporation	C Corporation
What is the total tax from Mike and Casey and the corporation
Sum each persons cash balance after taxes plus cash available to corporation
Which option would you recommend based on goal of minimizing taxes and maximizing cash flow as a whole? (based on the last 2 questions)