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Entrepreneur Jane Smith is a proprietor of a firm with pre-tax profits of \$1 million per year. She is considering converting her business to a C-Corporation in which she will pay out all profits as dividends to herself. Her personal income tax rate is 40%, and the corporate tax rate is 35%.

What is the impact of this conversion on her after-tax income?

A

No impact

B

$210,000 less income

C

$350,000 less income

D

$140,000 more income

E

$5,000 more income

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