Question
Becky and Jim are going to start a tech company business that they will both participate in on an active basis. They have enough money
Becky and Jim are going to start a tech company business that they will both participate in on an active basis. They have enough money saved to finance the business. Limited liability is a significant factor for the business. It is equally important to minimize income taxes. They have decided not to do business as a sole proprietorship. Annual earnings of the business are expected to be $200,000 before taxes. All profits after tax will be paid to Becky and Jim. Assume Becky and Jim are both single and have a marginal tax rate of 28%. Please advise them on the choice of business entity.
To assist you, please use the following format.
| Entity: C Corporation |
|
| Tax at Corporate level |
|
| Becky shareholder level tax on dividends |
|
| Jim shareholder level tax on dividends |
|
| Combined Entity/Owner tax liability |
|
| After Tax Cash Flow |
|
| Entity: S Corporation |
|
| Tax at Corporate level |
|
| Becky shareholder level tax on dividends |
|
| Jim shareholder level tax on dividends |
|
| Combined Entity/Owner tax liability |
|
| After Tax Cash Flow |
|
| Entity: LLC taxed as a Partnership |
|
| Tax at Corporate level |
|
| Becky shareholder level tax on dividends |
|
| Jim shareholder level tax on dividends |
|
| Combined Entity/Owner tax liability |
|
| After Tax Cash Flow |
|
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