Taylor Would Like to Organize DRK as Either an LLC

question 59

Essay

Taylor would like to organize DRK as either an LLC or as a C corporation generating a 13 percent annual before-tax rate of return on a $250,000 investment. Individual and corporate tax rates are both 30 percent and individual capital gains and dividends tax rates are 5 percent. DRK will distribute its earnings annually to either its members or shareholders.
a. Ignoring self-employment taxes, how much would Taylor keep after taxes if DRK is organized as either an LLC or as a C corporation?
b. Ignoring self-employment taxes, what are the overall (combined owner and entity level) tax rates if DRK is organized as either an LLC or as a C corporation?

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Definitions:

Conditioning

Conditioning is a process of behavior modification by which a subject comes to respond in a desired manner to a previously neutral stimulus.

Stimulus Presentation

The act of introducing a stimulus to a subject's sensory medium (e.g., visual, auditory) to provoke a response or examine the subject's behavior in psychological experiments.

Schedule of Reinforcement

A plan or strategy in behavioral psychology for determining which responses will be reinforced to shape or modify behavior.

Partial Reinforcement

A conditioning strategy in which a reward is not administered every time the desired behavior is performed, often leading to more resistant behavior change.