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Assume a taxpayer earns $150,000 of wages from his employer each year and he is considering starting a business on the side. He expects the business to operate at a substantial loss in the first couple of years. Focusing on tax analysis (and disregarding other considerations, such as limited liability), would you recommend he start the business as a C corporation or sole proprietorship? Why?

Assume a taxpayer earns $150,000 of wages from his employer each year and he is considering starting a business on the side. He expects the business to operate at a substantial loss in the first couple of years. Focusing on tax analysis (and disregarding other considerations, such as limited liability), would you recommend he start the business as a C corporation or sole proprietorship? Why?


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