Becca Would Like to Organize BMI as Either an LLC

question 35

Essay

Becca would like to organize BMI as either an LLC or as a corporation (taxed as a C corporation)generating a 4 percent annual before-tax rate of return on a $450,000 investment.Individual ordinary rates are 28 percent,corporate rates are 15 percent,and individual capital gains and dividends tax rates are 15 percent.BMI will distribute its earnings annually to either its members or shareholders.
a.Ignoring self-employment taxes,how much would Becca keep after taxes if BMI is organized as either a 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 BMI is organized as either an LLC or as a corporation (taxed as a C corporation)?

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Definitions:

Present Value

Today's value of future cash flows or a lump sum, calculated using an established return rate.

Discounted

The process of determining the present value of a payment or a series of payments made in the future, using a specific discount rate.

9%

Typically refers to a specific interest rate or percentage in financial contexts, such as a loan interest rate or investment return rate.

Annual Rate

The interest rate for a period of one year, often used to compare the yield of financial products or loans.