Jack would like to organize PPS as either an LLC or as a C corporation generating an

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Jack would like to organize PPS as either an LLC or as a C corporation generating an 11 percent annual before-tax return on a $100,000 investment. Assume individual ordinary rates are 35 percent, corporate rates are 15 percent, and individual capital gains and dividends tax rates are 20 percent. PPS will distribute its after-tax earnings every year as a dividend if is formed as a C corporation. Assume Jack is the sole owner of the entity and is actively involved in the business. Ignore self-employment taxes.

a. How much would Jack keep after taxes if PPS is organized as either an LLC or as a C corporation?

b. What are the overall tax rates if PPS is organized as either an LLC or as a C corporation?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For  answer-question

Taxation Of Individuals And Business Entities 2015

ISBN: 9780077862367

6th Edition

Authors: Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

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