Course: SLF 129 Legal Risk Management for The Small Business - Updated Sept 28

Case Study Assignment

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Unit 5 Case Study Assignment

Case Study Assignment:

Business tax is a much debated topic.  The U.S. tax code is over 13,000 pages long.  It also has created billion dollar industries in accounting and consulting.  Major business decisions are made based on these tax implications.  The following two cases have very different accumulated tax rates.

Research what each of these businesses will pay for both federal and state taxes (use the state tax rate that you reside in).

Case:

A)   You are the owner of a small business that specializes in artisan cheeses.  Your annual sales are $1,300,000 and you are incorporated as a C corporation.  Your deductible expenses total $850,000.  You take a salary of $75,000 a year from the business.  What is both the federal and state income tax due for the company and yourself?

B)   You own a %50 stake in an implement company.  Your partner owns the remaining %50.  The company is listed as an S corporation.  Total sales for the company are 3.5 million dollars.  Total deductible expenses are $2,540,000.  You and your partner split all income.  Your spouse also works outside of the business and receives $45,000 salary.  What is both the federal and state income tax due for the company and yourself?

Write a summary of what the tax implications will be for these two different scenarios and explain how these different tax implications affect how much income you would receive in each scenario.