Evon would like to organize SHO as either an LLC or as a corporation generating an 11 percent annual before-tax return on a $200,000 investment. Assume individual and corporate tax rates are 35 percent and individual capital gains and dividend tax rates are 15 percent. SHO will pay out its after-tax earnings every year to either its members or its shareholders.
a. How much would Evon keep after taxes if SHO is organized as either a corporation or an LLC?
b. What are the overall tax rates if SHO is organized as either an LLC or a corporation?