Question: Astrid, who is single, is a sales representative for several sporting goods manufacturers. She operates her enterprise as a sole proprietorship. Astrid has one employee,
Astrid, who is single, is a sales representative for several sporting goods manufacturers.
She operates her enterprise as a sole proprietorship. Astrid has one employee, Melvin, who serves as office manager for the business. Gross revenues are $250,000 annually. Annual operating expenses are
Astrid’s $50,000 term life insurance policy . $ 3,000
Melvin’s salary ............. 30,000
Payroll taxes and fees .......... 3,000
Utilities ................ 1,200
Rent .................. 4,800
Selling expenses ............ 8,000
Premiums paid for Melvin:
$50,000 term life insurance policy .... 3,000
Health insurance policy .......... 2,700
Astrid takes an annual draw of $2,700 to pay for health insurance coverage equal to Melvin’s. Assume Astrid is paid a salary of $100,000 and has income from other sources that offset her allowable deductions. Astrid is considering incorporating her business. Discuss the benefits that will accrue to Astrid by incorporating. Recommend any alternative courses of action.
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IndividualSole Proprietorship A sole proprietorship is not an entity separate from its owner A sole proprietor cannot be an employee of the business Therefore sole proprietors cannot receive deductibl... View full answer
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