Compute the total tax cost in 2004

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Reference no: EM13517142

Evan is setting up a new business. He can operate the business as a sole proprietorship or he can incorporate as a regular C corporation or as an S corporation. He expects that the business will have gross income of $130,000 in the first year with expenses of $25,000 excluding the following. He plans to take $35,000 from the business for living expenses as a salary and will have the business pay $3,000 annually for his health insurance premiums.

a. Compute the total tax cost in 2004 for each alternative if Evan is single and this is his only source of income.

b. Which alternative business form do you recommend based solely on the first year tax costs?

c. What are some of the other factors Evan should consider in deciding between a C corporation and an S corporation for his business?

Reference no: EM13517142

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