Discuss the tax aspects

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Beige Company has approximately $400,000 in net income in 2008 before deducting any compensation or other payment to its sole owner, Janet (who is single). Assume that Janet is in the 35% marginal tax bracket. Discuss the tax aspects of each of the following arrangements:

a. Janet operates Beige Company as a proprietorship.

b. Janet incorporates Beige Company and pays herself a salary of $100,000 and no dividend.

c. Janet incorporates the company and pays herself a $100,000 salary and a dividend of $199,750 ($300,000 - $100,250 corporate income tax).

d. Janet incorporates the company and pays herself a salary of $400,000.

Reference no: EM13124223

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