Becca Would Like to Organize BMI as Either an LLC

question 23

Essay

Becca would like to organize BMI as either an LLC or as a C corporation generating a 4 percent annual before-tax rate of return on a $450,000 investment. Individual ordinary rates are 28 percent, corporate rates are 15 percent, and individual capital gains and dividends tax rates are 15 percent. BMI will distribute its earnings annually to either its members or shareholders.
a. Ignoring self-employment taxes, how much would Becca keep after taxes if BMI is organized as either a LLC or as a C corporation?
b. Ignoring self-employment taxes, what are the overall (combined owner and entity level) tax rates if BMI is organized as either an LLC or as a C corporation?

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Definitions:

Prestigious Groups

Social groups that possess high status and are highly regarded in society or specific contexts.

Collectivistic Group Culture

A social culture emphasizing group goals, interdependence, and the prioritization of the group over the individual.

Individualistic Group Culture

A culture within a group that emphasizes individual achievement, autonomy, and interests.

Social Animals

Animals, including humans, that are naturally inclined to live in communities or groups and have complex interactions and relationships with each other.