Karen,single with No Dependents,wants to Set Up a Business

question 59

Essay

Karen,single with no dependents,wants to set up a business.She will use either a sole proprietorship or incorporate as a regular corporation.She expects the business to earn $45,000 after all expenses and payments to Karen except for federal taxes.Karen will take $25,000 from the business for living expenses (as a distribution from a sole proprietorship or a salary from a corporation).Considering only income taxes for 2015,should she establish the business as a C corporation or as a sole proprietorship?

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Definitions:

Natural Comparative Advantage

A situation where a country or region can produce a particular good or service at a lower opportunity cost compared to other countries or regions.

Factor Endowments

Refers to the quantity and quality of resources a country or region has available, such as labor, land, and capital.

Heckscher-Ohlin Theorem

An economic theory stating that countries export what they can most efficiently and abundantly produce.

Labor Intensive

describes industries or production processes that require a large amount of labor relative to capital in the production process.