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David would like to organize HOS as either an LLC or as a corporation generating a 12 percent annual before-tax return on a $300,000 investment. Individual and corporate tax rates are both 30 percent and individual capital gains and dividend tax rates are 15 percent. HOS will pay out its after-tax earnings every year to either its members or its shareholders.
a. Ignoring self-employment taxes, how much would David keep after taxes if HOS is organized as either an LLC or a corporation?
b. Ignoring self-employment taxes, what are the overall tax rates (combined owner and entity level) if HOS is organized as either an LLC or a corporation?
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