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use the following information for the next two parts (c) and (d): Alex will be...

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Finance

use the following information for the next two parts (c) and (d):

Alex will be the 100% owner of the new business, Venture, which is expected to generate pretax earnings of $200,000. Alexs marginal income tax rate is 37% with a 23.8% rate on qualified dividends and long-term capital gains (including the 3.8% net investment income tax).

c) Assume Alex organizes Venture as a C corporation, and the business will distribute one-half of its after-tax earnings as a dividend. Show your calculation of how much cash after taxes Alex will receive from the business, and the overall tax rate on Ventures income in the first year of operation.

d) Independent of your response to (c) above, now assume Alex organizes Venture as a single-

member LLC. Alex will be required to pay an additional 2.9% for self-employment tax and 0.9% for

the additional Medicare tax. Also, Alex will be eligible to claim a full deduction for qualified business income on Ventures income. Show your calculation of how much cash after taxes Alex will receive from the business, and the overall tax rate on Ventures income in the first year of operation.

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