Ed,an individual,incorporates two separate businesses that he owns by establishing two new C corporations.Each corporation generates taxable income of $50,000.As a general rule,each corporation will have a tax liability of $11,125.

Question

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Each C corporation is subject to a flat tax rate of 21% on its taxable income, which in this case would result in a tax liability of $10,500 ($50,000 x 21%). Therefore, the total tax liability for both corporations would be $21,000 ($10,500 + $10,500), which is greater than $22,250 (2 x $11,125).

Ed,an Individual,incorporates Two Separate Businesses That He Owns by Establishing