Olaf and Elsa, husband and wife filing a joint return, operate a sole proprietorship. They expect their taxable income next year to be $75,000, of which $70,000 is attributed to the sole proprietorship. Olaf and Elsa are contemplating incorporating their sole proprietorship. From a Federal income tax perspective (ignoring any QBI or self-employment taxes), which business structure is the most advantageous and why?

Multiple Choice

A corporation because their total tax liability is smaller

A sole proprietorship because it is not subject to double taxation

A corporation because it is a separate legal entity

A sole proprietorship because their total tax liability is smaller