Mr.John director of tax group just finished a meeting with new client, Mr. Rocky who desires to start a new landscaping business. Mr.John has adviced Mr.Rocky that he should organize a limited liability company because it offers the protection of limited liability and many tax advantages. However, Mr.John neglected to ascertain whether Mr.Rocky intends to start the business by himself or go into business with others.

Assume for purpose of this issye only Mr. Rocky will go into business with others. If weassume that Mr. Rocky business will be very profitable from the start and neither Mr. Rocky nor nay of his business partners plan to sell any of their business interests for a very long time, would it be better for them to treat the LLC as apartnership for federal tax purposes or to make an S selection so that The LLC is treated as an S corportation? Please explain your selection and discusses the pros and cons of federal tax treatment as both a partnership and an S corportation.

Please include code section, regulations, court cases or revenue rulings.

(A) You should discuss reducing Mr. Rocky employment taxes by paying out a portion of the LLC income from opeartions to Mr. Rocky in the form of a dividend. The other portion will be pais to Mr. Rocky in the form of wage compensation.