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Should Plum operate as a C corporation or as S corporation

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Problem - Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 32% income tax bracket.

Required -

a. Assume that Plum will reinvest its after-tax earnings in the growth of the company. Should Plum operate as a C corporation or as an S corporation?

b. Assume that Plum will distribute its after-tax earnings each year to its shareholders. Should Plum operate as a C corporation or as an S corporation?

Reference no: EM132649409

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