Karen, Single with $10,400 in Total Deductions, Wants to Set

Essay

Karen, single with $10,400 in total deductions, wants to set up a business. She will use either a sole proprietorship or incorporate as a regular corporation. She expects the business to earn $45,000 after all expenses and payments to Karen except for federal taxes. Karen will take $25,000 from the business for living expenses (as a distribution from a sole proprietorship or a salary from a corporation). Considering only income taxes for 2017, should she establish the business as a C corporation or as a sole proprietorship?