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Sam and Dave form an LLC that is taxed just like a partnership or pass through entity. Sam and Dave each own 50% of the
LLC. At the end of the year, the LLC has net income of $100,000. Sam and Dave decide to pay one half of the net income to
themselves as an agreed distribution. The remaining amounts stay in the LLC bank account. As a result
The LLC will pay income and social security tax on $100,000 and Sam and Dave will have to pay a dividend tax of 20% on their
distributions.
The LLC will pay tax on the $100,000 to the IRS as an entity level tax.
Sam will have to pay income and social security tax on $25,000
Dave will have to pay income and social security tax on $50,000

Respuesta :

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Based on the fact that Sam and Dave decided to pay themselves half of the net income, Dave will have to pay income and social security tax on $50,000.

What will happen to Sam and Dave?

When an LLC is formed, it is taxed on a pass-through basis which means that its income is treated as income of its partners as sole proprietors.

This means that the $100,000 net income will be treated as income for the Sam and Dave. Both of them will therefore pay income and social security taxes on $50,000 each which will be their share.

Find out more on LLC tax regimes at https://brainly.com/question/25020828.

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