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One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he’s trying to decide whether to operate the business as an S corporation or a C corporation. Explain to him the significant tax and nontax issues that will arise from choosing each of these entities compared to the other, including how income will be treated by the entity, the overall tax burden, and the effect of distributions of property or earnings from the entity to your client. (Note: Do not spend time addressing other types of business entities. Credit will only be given for discussion of the two business entities at issue.)
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