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:

Authoritative Parenting

A child-rearing style characterized by high responsiveness and high demands, balancing clear, fair rules with emotional support and understanding.

Psychosocial Competence

pertains to an individual's ability to effectively navigate and respond to social and psychological challenges.

Adolescents

are individuals in the transition phase from childhood to adulthood, typically aged between 13 and 19 years, experiencing significant physical, emotional, and social development.

Growth Spurts

Rapid periods of physical growth typically occurring during childhood and adolescence.