Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 32% tax bracket. Evaluate whether Plum should operate as a C corporation or as an S corporation given the following assumptions.
a. Plum will reinvest its after-tax earnings in the growth of the company.
b. Plum will distribute its after-tax earnings each year to its shareholders.