Jerry Would Like to Organize FBC as Either an LLC

question 20

Essay

Jerry would like to organize FBC as either an LLC or as a C corporation generating an 8 percent annual before-tax rate of return on a $400,000 investment. Individual and corporate tax rates are both 35 percent and individual capital gains and dividends tax rates are 15 percent. FBC will pay out its after-tax earnings every year to either its members or its shareholders.
a. How much would Jerry keep after taxes if FBC is organized as either an LLC or as a C corporation? (ignore self-employment taxes)
b. Ignoring self-employment taxes, what are the overall tax rates (combined owner and entity level) tax rates if FBC is organized as either an LLC or as a C corporation?

Comprehend the debate on the effectiveness and outcomes of inflation policies.

Analyze the relationship between government debt, fiscal policies, and economic prosperity.

Understand the impact of government debt on future generations and the economy.

Comprehend the effects of tax policies, including consumption taxes and marginal tax-rate reductions, on saving and investment.

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Definitions:

Need For Achievement

A psychological trait that drives individuals to pursue and attain challenging goals, often with a significant emphasis on excellence and overcoming obstacles.

Homeostasis

The dynamic process through which biological systems maintain stability and optimal internal conditions despite external changes.

Drives

Basic, innate urges that motivate behavior, such as hunger or thirst.

Cognitive-Mediational Theory

A theory in psychology that proposes our emotions are determined by our appraisal of the stimulus, suggesting that thoughts mediate between stimuli and emotional responses.