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:

Informational Influence

The effect on an individual's behavior or opinions due to the desire to be correct, often resulting from the acceptance of information from others as evidence about reality.

Injunctive Norms

Societal rules and guidelines that dictate what behaviors are perceived as approved or disapproved by a social group.

Descriptive Norm

The perception of what is commonly done or typical behavior within a specific context or group.

Injunctive Norm

Social norms that concern people's perceptions of what behaviors are approved or disapproved of by others.