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:

Categorical Data

Data that can be divided into specific groups or categories based on qualitative characteristics.

Variances

A measure of the dispersion indicating how far individual numbers in a dataset are from the mean.

Bimodal Distribution

A probability distribution with two different modes or peaks, representing two prevalent outcomes or characteristics in a dataset.

Variance

A measure of dispersion that indicates the average squared deviation of each number in a set from the mean of the set.