Jerry Would Like to Organize FBC as Either an LLC

question 16

Essay

Jerry would like to organize FBC as either an LLC or as a corporation (taxed as a C corporation)generating an 8 percent annual before-tax rate of return on a $400,000 investment.Individual and corporate tax rates are both 35 percent and individual capital gains and dividends tax rates are 15 percent.FBC will pay out its after-tax earnings every year to either its members or its shareholders.
a.Ignoring self-employment taxes,how much would Jerry keep after taxes if FBC is organized as either an LLC or as a corporation (taxed as a C corporation)?
b.Ignoring self-employment taxes,what are the overall tax rates (combined owner and entity level)tax rates if FBC is organized as either an LLC or as a corporation (taxed as a C corporation)?

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Definitions:

Completely Randomized Design

An experimental design where all subjects or experimental units are randomly assigned to treatments or control groups, ensuring that any variation among the treatments is due to the treatment effect and random chance alone.

Analysis of Variance

A statistical method used to compare the means of three or more samples to determine if at least one sample mean is significantly different from the others.

Null Hypothesis

A default assumption that there is no significant difference or effect, to be tested against an alternative hypothesis in statistical testing.

Mean Yields

The average outcomes produced or returns obtained from different experiments or investments.