Jerry Would Like to Organize FBC as Either an LLC

question 20

Essay

Jerry would like to organize FBC as either an LLC or as a C corporation generating an 8 percent annual before-tax rate of return on a $400,000 investment. Individual and corporate tax rates are both 35 percent and individual capital gains and dividends tax rates are 15 percent. FBC will pay out its after-tax earnings every year to either its members or its shareholders.
a. How much would Jerry keep after taxes if FBC is organized as either an LLC or as a C corporation? (ignore self-employment taxes)
b. Ignoring self-employment taxes, what are the overall tax rates (combined owner and entity level) tax rates if FBC is organized as either an LLC or as a C corporation?

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Definitions:

Sex Chromosomes

Chromosomes that determine the biological sex of an individual, with human males typically having one X and one Y chromosome and females having two X chromosomes.

Autism Spectrum Disorder

A developmental disorder characterized by difficulties with social interaction and communication, and by restricted or repetitive patterns of thought and behavior.

Attention-Deficit/Hyperactivity Disorder

A neurodevelopmental disorder characterized by patterns of inattention and/or hyperactivity-impulsivity that interfere with functioning or development.

Antisocial Personality Disorder

A personality disorder in which a person (usually a man) exhibits a lack of conscience for wrongdoing, even toward friends and family members; may be aggressive and ruthless or a clever con artist.