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.

Understand the roles and responsibilities of agents and principals in business transactions.

Identify the different types of principals and the implications of each type on agency agreements.

Assess liability issues related to agents, principals, and third parties in various scenarios.

Recognize the termination conditions of agency relationships and their consequences.

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Definitions:

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