David Would Like to Organize HOS as Either an LLC

question 3

Essay

David would like to organize HOS as either an LLC or as a corporation generating a 12 percent annual before-tax return on a $300,000 investment. Individual and corporate tax rates are both 30 percent and individual capital gains and dividend tax rates are 15 percent. HOS will pay out its after-tax earnings every year to either its members or its shareholders.
a. Ignoring self-employment taxes, how much would David keep after taxes if HOS is organized as either an LLC or a corporation?
b. Ignoring self-employment taxes, what are the overall tax rates (combined owner and entity level) if HOS is organized as either an LLC or a corporation?

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Definitions:

Article 9

A section of the Uniform Commercial Code governing secured transactions, where a creditor has a security interest in the personal property of a debtor as collateral for a debt.

UCC

Stands for Uniform Commercial Code, a comprehensive set of laws governing all commercial transactions in the United States.

Secured Financing

Financing or a loan that is backed by collateral, reducing the risk for lenders and often resulting in more favorable terms for borrowers.

Article 9

A provision within the Uniform Commercial Code (UCC) that governs secured transactions involving personal property, creating a framework for securing debts and financing statements.