Jaron Would Like to Organize TMZ as Either an LLC

question 32

Essay

Jaron would like to organize TMZ as either an LLC or as a corporation (taxed as a C corporation)generating a 6 percent annual before-tax rate of return on a $200,000 investment.Individual and corporate tax rates are both 40 percent and individual capital gains and dividends tax rates are 10 percent.TMZ will distribute its earnings annually to either its members or shareholders.
a.Ignoring self-employment taxes (and the additional Medicare Tax),how much would Jaron keep after taxes if TMZ is organized as either an LLC or a corporation (taxed as a C corporation)?
b.Ignoring self-employment taxes (and the additional Medicare Tax),what are the overall tax rates (combined overall and entity level)if TMZ is organized as either an LLC or as a corporation (taxed as a C corporation)?

Recognize the importance of financial information publication by not-for-profit organizations.

Identify the components and significance of a firm's balance sheet and its relation to financial positioning.

Understand the preparation and utility of cash budgets in financial planning.

Learn about various financial ratios, their computations, and their importance in assessing financial health.

---

Definitions:

Utility Function

A mathematical representation of how different combinations of goods or services produce levels of happiness or satisfaction for an individual or entity.

Pareto Optimal

A state of allocation of resources in which it is impossible to make any individual better off without making at least one individual worse off, indicating an efficient distribution of goods and resources.

Endowment

The total resources available to an individual or institution, including assets, capabilities, and financial means.

General Equilibrium Analysis

A method in economics that attempts to understand how supply and demand interact across multiple markets simultaneously, and how they reach a state of balance.