Rondo and his business associate, Larry, are considering forming a business entity called R&L but they are unsure about whether to form it as a C corporation, an S corporation, or an LLC taxed as a partnership. Rondo and Larry would each invest $300,000 in the business. Thus, each owner would take an initial basis in his ownership interest of $300,000 no matter which entity type is formed. Shortly after the formation of the entity, the business borrowed $80,000 from the bank. If applicable, this debt will be shared equally between the two owners.

a. How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a C corporation?

LLC

C corporation

b. What is the overall tax rate on BALs income in the first year if BAL is organized as an LLC or as a C corporation? (Round your final answers to 2 decimal places.)

LLC

C corporation