Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 33% tax bracket.
a. Plum will reinvest its after-tax earnings in the growth of the company. Should Plum operate as a C corporation or as an S corporation?
b. Plum will distribute its after-tax earnings each year to its shareholders. Should Plum operate as a C corporation or as an S corporation?