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Beige Company has approximately $200,000 in net income in 2008 before deducting any compensation or other payment to its sole owner, Janet (who is...

Beige Company has approximately $200,000 in net income in 2008 before deducting any compensation or other payment to its sole owner, Janet (who is single). Assume that Janet is in the 35% marginal tax bracket. Discuss the tax aspects of each of the following arrangements:

a. Janet operates Beige Company as a proprietorship.

b. Janet incorporates Beige Company and pays herself a salary of $50,000 and no dividend.

c. Janet incorporates the company and pays herself a $50,000 salary and a dividend of $108,250 ($150,000 – $41,750 corporate income tax).

d. Janet incorporates the company and pays herself a salary of $400,000.

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