Solution-What is the income-tax liability

What is the income-tax liability

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Reference no: EM133048146

Question - Lilly operates a housecleaning business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets the business, and provides supplies and equipment. The business has been generating net taxable profits of $70,000 per year, before considering the QBI deduction. As a sole proprietor, Lilly qualifies for the 20% deduction, reducing taxable income from the business to $56,000.

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

What is the Income-tax liability if operated as a C corporation? What is the Income-tax savings?

b. How would your conclusion change if Lilly's marginal tax rate were only 28%? Annual tax savings will increase/decrease to?

Reference no: EM133048146

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What is the income-tax liability

Reference no: EM133048146

Reference no: EM133048146

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