Many small business proprietors start with a sole proprietorship to avoid the costs of forming a corporation or LLC. This is usually a wise decision as statistics show that many small businesses lose cash for the first several years. Marginal tax rate is the rate of tax would you on your last (or highest) regarding income. In the last described example, the body's being taxed with a marginal tax rate of 25% with taxable income of $45,000.
And also mean the affected individual is paying 25% federal tax on her last dollars of income (more than $33,950). 
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