Please read the article and answer about questions. Problem #1: Individual A des

Question

Please read the article and answer about questions.

Problem #1: Individual A desires to form a new business that will operate a beauty salon. A will be the sole owner and will be active in the business. The business will have several part-time employees and is not expected to experience substantial growth. A expects the business to generate approximately $100,000 of income per year. A will contribute various business assets to begin operations and the business will lease its real estate from a landlord. What is the optimal tax entity for the business?

Problem #2: Individuals A, B, C and D desire to form a new business entity that will create and develop intellectual property related to the pharmaceutical industry. The business will be a high?risk venture, which could experience substantial growth. Individuals A, B, C and D will provide an initial round of investment capital in the form of cash to begin operations. Depending upon the success of the initial operations, additional investors may be sought for future rounds of investment. What is the optimal tax entity for the business?

Problem #3: Individual X is considering taking on a position with a new start?up company. Individual X is attracted to the new job due to the potential the company has to experience explosive growth in the future. The company has limited cash flow at the present time, but the company's owners are willing to grant an equity interest to Individual X. From Individual X's perspective, what is the optimal entity type and equity structure for the company and for X?

Explanation / Answer

It is a sole properiership business where your personal assets are at stake if your business fails and you are sued over debts. In terms of taxation, there is no distinction between personal income and business income. Taxes are simpler in this type of entity It is a partnership business which is an unincorporated business with two or more owners.i come and losses from the partnership are divided among the partners and each partner reports his/her share on his/her individual tax return and pays taxes at the individual tax rates. A corporation is an ideal entity type if a new startup wants to bring in outside investors. A corporation is required by law to distinguish between contributed capital by its owners and the company's earnings over the years. The shares account show the investments made by owners (shareholders) into the company. The retained earnings account keeps track of all the company's earnings and all the dividends paid to the owners (shareholders)

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