Bates was working to establish a business enterprise with

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Shawn Bates was working to establish a business enterprise with four of his wealthy friends each of the 5 individuals would receive a 20% ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investors are taxed at the rate of 15% on divident income and 30% on all other income and that the corporate tax rate is 30%, also assuming that the new company is expected to earn 400.000 of cash income before taxes during its first year of operation. all earnings are expected to be immediately distributed to the owners.

required: calculate the amount of after tax cash flow availabe to each investor if the business is established as a partnership versus a corporation.

Reference no: EM13602825

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