Prepare a memorandum identifying as to which of the two (2) entity forms that Shirley

and Clarence should select (considering both Tax and Nontax Factors).

Problem 1

Renella is an entrepreneur who likes to be actively involved in her business ventures. She is going to invest $500,000 in a business that she projects will produce a tax loss of approximately $125,000 per year in the short run. However, once consumers become aware of the new product being sold by the business and the quality of the service it provides, she is confident the business will generate a profit of at least $200,000 per year. Renella has substantial other income (from both business ventures and investment activities) each year. She will be the sole owner of the business. Advise Renella on the business form she should select for the short run

Problem 2

Shirley and Clarence Fortune are going to operate their florist shop as a partnership or as an S

Corporation. After paying Salaries of $100,000 to each of the owners, the florist shop's annual

earnings are projected to be about $150,000. The earnings are to be invested in the growth of the

business.