Tax advantages and disadvantages of business types

My 2 shareholder and I provide businesses and individuals with office
services including coping, mailing, secretarial, computer access to a
variety of software programs and Internet service, and pick-up and
delivery service.  We were granted a corporate charter effective
January 1, 2004, electing S status with equal holdings. 

Each shareholder made a capital contribution of $10,000.  One hundred
shares of common stock were issued to each shareholder at a par value of
$10.00 per share.  The remainder of the capital contributions was
posted to paid-in capital

The corporation filed Form 2553 on February 8, 2004, electing S status
to be effective January 1, 2004.

Preopening Activity:

The corporation purchased a building on January 5, 2004, for $60,000
(including $10,000 land). It is being depreciated using 39-year general
MACRS for tax purposes. The corporation purchased new office furniture
and equipment on January 4, 2004, for $4,500. It is being depreciated
using 7-year general MACRS for tax purposes. The owners want to claim
the 50% additional first-year depreciation on the furniture and
equipment.

Income:

Gross receipts: $117,585

Bank interest: $1,202

Expenses:

Compensation of officers $45,000 Employee Wages $12,000

FICA Taxes 4,361 FUTA and SUTA taxes 1,736

State income tax 1,400 Personal Property tax 418

Real Estate tax 835 Interest Expense 4,031

Repairs 673 Gas & oil 4,219

Depreciation 7,080 Supplies 1,315

Charitable contributions 300

Balance Sheet:

As of December 31, 2004, we had total assets of $96,418.

Cash $29,232

Investments 9,766

Fixed assets 54,500

Accumulated depreciation (7,080)

Land 10,000

As of December 31, 2004, we had total liabilities of $96,418.

Short-term notes payable $4,000

Long-term notes payable 48,000

Common stock 3,000

Additional paid in capital 27,000

Retained earnings 14,418