Taylor Would Like to Organize DRK as Either an LLC

question 59

Essay

Taylor would like to organize DRK as either an LLC or as a corporation (taxed as a C corporation)generating a 13 percent annual before-tax rate of return on a $250,000 investment.Individual and corporate tax rates are both 30 percent and individual capital gains and dividends tax rates are 5 percent.DRK will distribute its earnings annually to either its members or shareholders.
a.Ignoring self-employment taxes,how much would Taylor keep after taxes if DRK is organized as either an LLC or as a corporation (taxed as a C corporation)?
b.Ignoring self-employment taxes,what are the overall (combined owner and entity level)tax rates if DRK is organized as either an LLC or as a corporation (taxed as a C corporation)?

---

Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Selling Price

The fixed or negotiated amount at which a product or service is sold to customers.

Fixed Costs

Business costs that do not vary with the amount of goods produced or the volume of sales.

Material Cost

The expense incurred to acquire raw materials needed to produce a product or complete a project.