Essay
Jaron would like to organize TMZ as either an LLC or as a C corporation generating a 6 percent annual before-tax rate of return on a $200,000 investment. Individual and corporate tax rates are both 40 percent and individual capital gains and dividends tax rates are 10 percent. TMZ will distribute its earnings annually to either its members or shareholders.
a. Ignoring self-employment taxes (and the additional Medicare Tax), how much would Jaron keep after taxes if TMZ is organized as either an LLC or a C corporation?
b. Ignoring self-employment taxes (and the additional Medicare Tax), what are the overall tax rates (combined overall and entity level) if TMZ is organized as either an LLC or as a C corporation?
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