How would your conclusion change

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Question - Megan operates a housecleaning business as a sole proprietorship. She oversees a team on 10 cleaning personnel, markets the business, and provides supplies and equipment. The business has been generating net taxable profits of $50,000 per year, before considering the QBI deduction. As a sole proprietor, Megan qualifies for the 20% deduction, reducing taxable income from the business to $40,000.

a. Assume that Megan's marginal tax rate on ordinary income is 35% and that she has no pressing need for cash flow from this business. Should Megan consider incorporating and operating the business thru a C corporation?

b. How would your conclusion change if Megan's marginal tax rate were only 28%?

Reference no: EM132437370

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