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Richard plans to invest $100,000 for a 50 percent interest in a small business. His...

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Accounting

Richard plans to invest $100,000 for a 50 percent interest in a small business. His friend Jack will also invest $100,000 for the remaining 50 percent interest. On their investment, they expect to generate 10 percent before-tax return the first year. Richards marginal tax rate is 24 percent, and Jacks marginal tax rate is 32 percent.Their tax rate for capital gains and dividend income is 15 percent They need to decide whether to establish the business as a partnership or as a C corporation.

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