Suppose you are a tax advisor to a new startup company, and they are trying to decide how to structure their business to minimize their tax liability. The company has two co-founders, and they are trying to decide whether to form a partnership or a corporation. They expect the company to have income of $1 million in the first year of operation and $2 million in the second year of operation.

a) Calculate the income tax liability for the company in each year if they form a partnership, assuming that the income is split equally between the two co-founders. The tax rate for the partnership is 25%.

b) Calculate the income tax liability for the company in each year if they form a C corporation. The tax rate for the corporation is 21%.

c) Calculate the income tax liability for the company in each year if they form an S corporation. The tax rate for the S corporation is also 21%.

d) Based on your analysis in parts (a), (b), and (c), make a recommendation to the co-founders as to whether they should form a partnership, C corporation, or S corporation. Explain your reasoning and any assumptions you have made in your analysis.

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