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:

Public Works Program

Government-funded projects aimed to construct public facilities or infrastructure and often used to provide employment.

Legal Fees

Charges for the advice and services provided by lawyers, solicitors, or other legal professionals.

Public Support

The backing or endorsement from the general public or specific societal groups for an idea, policy, or entity.

Management Rights

The legal and implied rights of employers to make decisions regarding the operation of their businesses, including hiring, work assignments, and organizational policies.