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How much additional spendable income will each investor have

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New business is just being formed by 10 investors, each whom will own 10% of the business. The firm is expected to earn $900,000 before taxes each year. The corporate tax rate is 34% and the personal tax rate for the firm's investors is 35%. The firm does not need to retain any earning, so all of its after-tax income will be paid out as dividends to its investors. The investors will have to pay personal taxes on whatever they receive. How much additional spendable income will each investor have if the business is organized as a partnership rather than as a corporation?

Reference no: EM13205186

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