FINA1221 Study Guide - Quiz Guide: Legal Personality, Dividend Imputation, Private Company Limited By Shares

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bluefox653

16 Jun 2019

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Company has a separate legal entity from its owners. Hence, owners of a corporation are not liable for obligations the corporation enters into. Companies have a limited liability, whereby the members of the company are not personally liable for the company"s debts or liabilities: you are a shareholder in an australian corporation. The corporations earns per share before taxes. Once it has paid taxes, it will distribute the rest of its earnings to you as a dividend. The corporate tax rate is 30% and you are on the lowest personal tax rate of 19%. Given that your personal tax rate is 19%, your tax payment should be (. 4 + sh. 6) x 19% = sh. 38. You will receive sh. 6 - 0. 38 = sh. 22 back as tax rebate. In conclusion, total amount left for you is > . 4 + 0. 22 = . 62. Direct approach > apply tax rate (19%) on the company"s earnings.

Related Questions

You are a shareholder in a C corporation. The corporation earns$1.85per share before taxes. Once it has paid taxes it willdistribute the rest of its earnings to you as a dividend. Assumethe corporate tax rate is 40% and the personal tax rate onâ (bothdividend andâ non-dividend) income is 30%.

How much is left for you after all taxes areâ paid?

You are a shareholder in an S corporation. The corporation earns$ 1.63per share before taxes. As a pass throughâ entity, you willreceive $ 1.63 for each share that you own. Your marginal tax rateis20%.

How much per share is left for you after all taxes areâpaid?

sapphirecamel913

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In deciding which entity to use for a new business, it is good to review the benefits and disadvantage of each one. A corporation According to e-text (page 1094) A corporation is liable to third person for the act of it is officers, employees, and agent to the same extent that a natural person is liable act of agents and employees. Because of the corporation is a separate legal person debt, the debts that owe are ordinarily the obligation of the corporation only. It is good to know the advantage and the person itself is not responsible of the corporation debts because nobody want debts that goes after their personal properties. I think thatâs the reason business owner choose a form of corporation however, the double taxation of appreciated assets on sale or dissolution is a bad disadvantage but it can be a right choice for certain situation because nobody wants to hold liable for their business debts, or personal income or any other personal assets. An owner always wants taxable profit and retain growth to pay down their business debts, even though the corporations taxes are extremely higher than a LLC, but I still recommended a business to choose a corporation that better benefit for them. A LLC taxes are lower but owner is personally obligator to any debts. It is good to know that corporation can also deduct disability insurance for owner-employees which is a significant advantage, reduced gain for capital gain and audit potential for tax liability A corporation enjoys limited liability, while partner is personal liable for the business. Frost, T. S. (1984). In regard to taxes, a corporation can generate tax saving if the corporate tax rate is lower than the personal one and if earning is retained in the corporation. the worse part will be the shareholder because they can be held personally liable for corporate debt and the creditor can now go after the shareholder property and their bank account and other assets that satisfy their dues. Frost, T. S. (1984). Tax aspects of the form of doing business. Dun and Bradstreet, Inc.D & B Reports, 22(1), 58. Starkman, J. (2007). Advantages of a C corporation. The Tax Adviser, 38(10), 617-618.

lavenderfrog549

National Business Machine Co. (NBM) has $6 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as a special dividend at the end of three years. In this case, the firm can invest in either Treasury bills yielding 2 percent or a 4 percent preferred stock. IRS regulations allow the company to exclude from taxable income 70 percent of the dividends received from investing in another companyâs stock. Another alternative is to pay out the cash now as dividends. This would allow the shareholders to invest on their own in Treasury bills with the same yield, or in preferred stock. The corporate tax rate is 36 percent. Assume the investor has a 30 percent personal income tax rate, which is applied to interest income and preferred stock dividends. The personal dividend tax rate is 20 percent on common stock dividends.

Suppose instead that the company pays a $6 million dividend now and the shareholder reinvests the dividend for three years.

What is the total aftertax cash flow to shareholders if the shareholder invests in preferred stock?

oliveant352

FINA1221 Study Guide - Quiz Guide: Legal Personality, Dividend Imputation, Private Company Limited By Shares

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