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When to Make a Company a Proprietorship

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Good Co. had a net loss of $75,000 from merchandising operations in 2010. Jane owns Good Co. and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if Good Co. were a proprietorship or a C corporation?

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Solution Summary

This solution assesses a company to determine whether their tax situation would benefit more from being designated as a proprietorship or a C- Corporation.

Solution Preview

What is clear from the description is that basically, Good Co. is better off as a proprietorship. The reason is that as a proprietorship, it is not a taxable entity, and the income is ...

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