Beige Company Has Approximately $400,000 in Net Income in 2008

question 47

Essay

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.

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Definitions:

Standards Of Conduct

Established guidelines and principles expected to be followed by individuals within an organization or a profession, ensuring ethical and responsible behavior.

Business Ethics

The study of appropriate business policies and practices regarding potentially controversial subjects including corporate governance, insider trading, bribery, discrimination, corporate social responsibility, and fiduciary responsibilities.

Social Responsibility

Social responsibility involves businesses and individuals acting in a manner beneficial to society, focusing on ethical practices, sustainability, and community welfare.

Work Environment

The setting, conditions, and culture in which employees perform their job duties, including physical space, social aspects, and organizational practices.