Employment taxes apply to all entity forms of operating a business. As a result, employment taxes are a neutral factor in selecting the most tax effective form of operating a business.

Question

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Employment taxes apply to wages paid to employees, but the impact on the business owner's tax liability can vary significantly depending on the entity form (e.g., sole proprietorship, partnership, corporation). Different entity forms have different rules for how owners are paid and taxed, affecting the overall tax efficiency of the business.

Employment Taxes Apply to All Entity Forms of Operating a Business