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Jordan and her brother, Jason, purchase a hardware store from a local bank which acquired it through foreclosure. Because the bank wants to sell the business, Jordan and Jason can buy it for only $160,000. Jordan will invest $42,000 and own 70% of the business, and Jason will invest $18,000 and own the remaining 30%. The bank is financing the remaining $100,000 with a nonrecourse loan secured by the building ($40,000), inventory ($45,000), and equipment ($15,000). Although Jordan and Jason believe the store will prove to be an excellent investment within a few years, they expect losses of $35,000, $20,000, and $14,000 in the first three years or operation. They anticipate turning a profit of $16,000 on the fourth year. Jason and Jordan are unsure whether to operate the business as a C-corporation or an S-Corporation. Both will materially participate in running the hardware store. Which is the best form for operating the business? Why?

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