Agatha is planning to start a new business venture and must decide whether to operate as a sole proprietorship or incorporate. She projects that the business will generate annual cash flow and taxable income of $100,000. Agatha's personal marginal tax rate, given her other sources of income, is 37 percent. (Ignore any employment tax consequences.)

a. If Agatha operates the business as a sole proprietorship, calculate the annual after-tax cash flow available for reinvestment in the business venture. Assume the sole proprietorship will qualify for the 20 percent Section 199A deduction.

b. If Agatha operates the business as a regular (C) corporation that makes no dividend distributions, calculate the annual after-tax cash flow available for reinvestment in the business.

c. Now suppose that Agatha wishes to withdraw $20,000 per year from the business and will reinvest any remaining after-tax earnings. What are the tax consequences to Agatha and the business of such a withdrawal if the business is operated as a sole proprietorship? How much after-tax cash flow will remain for reinvestment in the business? How much after-tax cash flow will Agatha have from the withdrawal?

d. What are the tax consequences to Agatha and the business of a $20,000 withdrawal in the form of a dividend if the business is operated as a C corporation? How much after-tax cash flow will remain for reinvestment in the business? How much after-tax cash flow will Agatha retain from the dividend?

e. If Agatha wants to operate the business as a corporation but also wants to receive cash flow from the business each year, what would you recommend to get a better tax result?