John Brown and Alice Green want to start a business together. They will have equal ownership of the company. Alice would like to know whether a
partnership or a corporation would be the best form of business (for her
particular situation), strictly from a tax perspective. Alice would not take any form of payment from the company in the first year.
The following information is available for Alice. Alice Green:
Employment income = $100,000 Interest income = $5,000
A loss of $25,000 is anticipated for Year 1 of the business. Assume a constant personal tax rate of 41%.
The corporate tax rate is 15%. Required:
Based solely on minimizing Alice's Year 1 tax liability, which form of business will be most beneficial to Alice? Support your answer with calculations.

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The Answer of John Brown and Alice Green want to start a business together. They will have equal ownership of the company. Alice would like to know whether a
partnership or a corporation would be the best form of business (for her
particular situation), strictly from a tax perspective. Alice would not take any form of payment from the company in the first year.
The following information is available for Alice. Alice Green:
Employment income = $100,000 Interest income = $5,000
A loss of $25,000 is anticipated for Year 1 of the business. Assume a constant personal tax rate of 41%.
The corporate tax rate is 15%. Required:
Based solely on minimizing Alice's Year 1 tax liability, which form of business will be most beneficial to Alice? Support your answer with calculations.

John Brown and Alice Green Want to Start a Business