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Tom and Jerry are going to start an ice-cream business in which they both will participate on an active basis. Limited liability is a significant

Tom and Jerry are going to start an ice-cream business in which they both will participate on an active basis. Limited liability is a significant factor for the owners, but equally important is the minimization of income taxes. Tom and Jerry have narrowed their choice of business form to a C corporation or a general partnership. Annual earnings before taxes are expected to be $240,000, and any after tax profit will be distributed. Tom and Jerry are both single and have a marginal Federal income tax rate of 22 percent. Advise Tom and Jerry on the choice of business form.

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