Daniel, who is single, estimates that the profits of his business for the current tax year will be $200,000; he has no other sources of gross income. Since the 21% corporate rate is less than Daniel's marginal rate of 32%, he would save taxes operating the business as a C corporation.

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Operating as a C corporation might initially seem to offer a lower tax rate, but it introduces double taxation: once at the corporate level on profits, and again at the individual level on dividends or when earnings are distributed, potentially leading to a higher overall tax burden than operating as a sole proprietorship or pass-through entity where income is taxed at the individual's rate only once.

Daniel, Who Is Single, Estimates That the Profits of His