Jaron Would Like to Organize TMZ as Either an LLC

question 26

Essay

Jaron would like to organize TMZ as either an LLC or 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 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 C corporation?

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Definitions:

United States

A country located primarily in North America, consisting of 50 states and a federal district, known for its diverse cultures and historical significance.

Free Care

Healthcare services provided without charge to the patient, often funded by charitable organizations, government programs, or healthcare providers as a form of social service.

Birth Process

The series of physiological and physical events that lead to the delivery of a baby, from the onset of labor to the birth.

Contractions

In physiology, the process of muscles becoming tightened or shortened, often referring specifically to the rhythmic tightening of uterine muscles during labor that help to facilitate childbirth.