Tax planning Assignment 2

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 24%. Please advise them on the choice of business entity. I have attached a suggested format to help you.

Tax at 28%

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 Recommendation with an explanation