Problem 13-34 (LO. 1, 2, 3) Amy and Jeff Barnes are going to operate their florist shop as a partnership or as an S corporation. After paying salaries of $45,000 to each of the owners, the shop's earnings are projected to be about $60,000. The earnings are to be invested in the growth of the business Complete the letter to Amy and Jeff Barnes advising them as to which of the two entity forms they should select Raabe, Young, Nellen, & Maloney, CPAs 5191 Natorp Boulevard Mason, OH 45040 March 12, 2019 Amy and Jeff Barnes 5700 Redmont Highway Washington, DC 20024 Dear Amy and Jeff I am responding to your request for advice on the business entity form to be selected for operating the florist shop. In our conversation, the inclination was to conduct the business as a partnership or as an S corporation After paying salaries of $45,000 to each of you, the profits of the business are projected to be about $60,000 The intent is to invest the earnings in the growth of the business rather than make distributions In selecting an entity form, consideration should be given to consequences for the partnership form versus the S corporation form would be corporation, the salaries of $45,000 is employment taxes on these amounts. Therefore, the S corporation payments A partnership payment to partners for services. This payment to the partner and subject to self-employment tax. Any payments treated as distributions factors. The tax As an S your gross income and pay deduct the salary pay wages to the partners. A partnership may make a guaranteed deductible by the partnership and taxed deductible by the partnership. Partnerships and S corporations benefit from the 20% deduction on the qualified business income from the entity. However, each partner subject to self-employment tax on the share of partnership income