Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, th entity is expected to generate an 9 percent annual before-tax return on a $560,000 investment. Andrea's marginal income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8 percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC, Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Further, she is eligible to claim the deduction for qualified business income. Assume that SHO w pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation. a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or corporation? (Round intermediate calculations and your final answers to the nearest whole dollar.) LLC After-tax cash flow
Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, th entity is expected to generate an 9 percent annual before-tax return on a $560,000 investment. Andrea's marginal income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8 percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC, Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Further, she is eligible to claim the deduction for qualified business income. Assume that SHO w pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation. a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or corporation? (Round intermediate calculations and your final answers to the nearest whole dollar.) LLC After-tax cash flow
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
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Transcribed Image Text:Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the
entity is expected to generate an 9 percent annual before-tax return on a $560,000 investment. Andrea's marginal
income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8
percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC,
Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the
additional Medicare tax. Further, she is eligible to claim the deduction for qualified business income. Assume that SHO will
pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation.
a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or a C
corporation? (Round intermediate calculations and your final answers to the nearest whole dollar.)
LLC
C corporation
After-tax cash flow
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