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?

---

Definitions:

Mitochondria

Organelles within eukaryotic cells that produce energy through cellular respiration, often referred to as the powerhouse of the cell.

Electrolytes

Substances that dissolve in water to form a solution that conducts electricity, often important in bodily functions.

Anaerobic Respiration

A process of energy production that occurs in the absence of oxygen, converting glucose to energy in cells.

Oxygen

A chemical element with symbol O and atomic number 8, essential for respiration in most living organisms and a component of the Earth's atmosphere.