question archive Compute how much tax is owed if your company earns $760,000+U dollars pretax (and pays out all the net income to yourself) under 3 different forms of organizations: proprietorship, limited liability company, and corporation (assuming your personal income tax rate is 37% and the corporate income tax rate is 21%) b
Compute how much tax is owed if your company earns $760,000+U dollars pretax (and pays out all the net income to yourself) under 3 different forms of organizations: proprietorship, limited liability company, and corporation (assuming your personal income tax rate is 37% and the corporate income tax rate is 21%) b
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Compute how much tax is owed if your company earns $760,000+U dollars pretax (and pays out all the net income to yourself) under 3 different forms of organizations: proprietorship, limited liability company, and corporation (assuming your personal income tax rate is 37% and the corporate income tax rate is 21%)
b. Compute how much you personally owe if your business goes bankrupt with $20,000+U more in liabilities than assets under 3 different forms of organization: proprietorship, limited liability company, and corporation
c. Compute how much money you would have in U+1 years if you have $2000 and earn 6% per year
d. Compute how much money you would have in U+1 years if you have $2000 and earn 1.21% per year
(U=57)
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Solution:
A)
Proprietorship :
Proprietorship or sole proprietorship business taxed at an personal income tax rate. So, net tax owed = $ 760,000 X 37% = $ 281,200
LLC :
LLC doesn't pay tax. It is a pass through entity. So income from business(LLC) transfer to owner of the LLC and taxed at personal income tax rate.
So, net tax owed = $ 760,000 X 37% = $ 281,200
Corporation :
Income of Corporation taxed at corporate income tax rate. So, net tax owed = $ 760,000 X 21% = $ 159,600. As corporation is not a pass through entity thus personal income tax rate of the owner has not been considered to determine the amount of net income tax owed.
B)
In case of proprietorship,proprietor is personally liable for the any amount due.Thus,in the given case,I will be liable for the whole amount outstanding.
In case of limited liability,the owners are not personally liable for the company's debt.In case of limited liability,owners are required to pay only to the extent of their investment in business if the company goes bankrupt.Thus in the given case,I am not personally liable for any amount.
In case of corporation,owners are not personally liable for any debt of the company.Thus in the given case,I am not personally liable for any amount.
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