Emmy Would Like to Organize PRK as Either an LLC

question 65

Essay

Emmy would like to organize PRK as either an LLC or as a C corporation generating a 15 percent annual before-tax rate of return on a $100,000 investment. Individual ordinary rates are 25 percent, corporate rates are 15 percent, and individual capital gains and dividends tax rates are 5 percent. PRK will distribute its earnings annually to either its members or shareholders.
a. Ignoring self-employment taxes, how much would Emmy keep after taxes if PRK is organized as either an LLC or as a C corporation?
b. Ignoring self-employment taxes, what are the overall tax rates (combined entity and owner level) if PRK is organized as either an LLC or a corporation?

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Definitions:

Personal Dispositions

Enduring characteristics or traits that influence behaviors and attitudes.

Central Route Persuasion

A method of persuasion that employs direct, relevant, logical messages aimed at creating a thoughtful and reasoned response.

Dispositional Attribution

The tendency to attribute someone's behavior to their personality or disposition rather than to situational factors.

Situational Attribution

The process of explaining someone's behavior based on external factors or the context of the situation rather than personal characteristics.