BUSINESS FORMATIONS

 Running Head: BUSINESS FORMATIONS 1
A COMPARATIVE ANALYSIS OF PROPRIETORSHIP vs. CORPORATIONS
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BUSINESS FORMATIONS 2
Executive summary
Starting a business has always been easier said than done, however with clear analysis of the
options available, it can be an easy endeavor. This paper is examining different formations of
business, and comparing sole proprietorship to corporations. The purpose for this paper is to
establish and operate California Communications Company dealing in the phone and tablet
manufacturing, putting into consideration the ramifications of tax formations. When starting a
business, it is important that one decides on which form of business entity they wish to establish.
The form of business determines which form of income tax return to use. The USA federal
government levies four different types of business taxes. The four taxes include
 Income tax
 Taxes for employers
 Self-employment tax
 Excise taxes
The ambition of the business scheme is to capitalize on the buildup of wealth to the running of
California Communications Company, the family, after making a consideration of all the taxes.
This paper will examine the methodology in different forms of businesses; analyze the basic
taxes involved in setting up a business. It analyses the rating of taxes on businesses that are set
to run in California.
Marketing Methodology
California Communications Company is a limited liability company that deals in selling of
phones and tablets both in the local market and international market. Their phones have android 
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software and range between $200 and $1000. They make their gross revenue from sales of these
phones and tablets. The company also has room for collecting used computers and refurbishing
them for the market.
Their customers buy products from California and are proud to have one of their own enhancing
the telecommunication industry.
There are numerous different forms of business operations which include
 Partnerships
 Sole proprietorship
 Corporation
 S Corporation
 Limited Liability Company
There are numerous differences between a sole proprietorship form of a business and
partnership. The differences acts as a help to entrepreneurs to make a selection of the best choice
of business form that they would want to operate.
Company expenses
The success of a company is to large extend in the amount of return it can extract from its
investment. The California communications company like any other has the challenge to
minimize on its costs by finding ways to offset the unnecessary costs or find alternatives which
are cheaper. Rent is one of the expenses to be met as an operating cost for the company. The
decision on whether to buy a business premise or pay rent will major depend on the rates of the
two and doing a cost benefit analysis. It is however cheaper to pay rent than buy a premise, this
nonetheless costly in the long run and there is need to acquire a property when it is feasible. Due 
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to such factor as inflation, the rates of both the employees’ salaries and the rent payable is
projected to rise.as the employees grow in both experience and age, and for the purposes of
motivation them, the average salary expense for the company increases every year. This is
illustrated in the sheet next.
California communications company expenses
year employees salary $ rent $
1 50,000 90000
2 50,001 90003
3 50,002 90006
4 50,003 90009
5 50,004 90012
6 50,005 90015
7 50,006 90018
8 50,007 90021
9 50,008 90024
10 50,009 90027
11 50,010 90030
12 50,011 90033
13 50,012 90036
14 50,013 90039
15 50,014 90042
16 50,015 90045
17 50,016 90048
18 50,017 90051
19 50,018 90054
Membership:
A sole proprietorship has a single owner while a partnership has two or more owners limited to
ten in the business of banking, and twenty to other business cases. 
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Formation
A partnership is formed through an oral agreement which might also be in written form while a
sole proprietorship form of business is formed through one person’s decision without any
approval of legal administration.
Registration
Registering a sole proprietorship is not a must. It just has to follow some business
compliance to start operating. More so, it is governed by rules though no specific law of statute
is set to govern how the business functions.
Partnerships have a higher opportunity of raising capital in big amounts because of the
number of contributors. This makes the scope of raising enough financial base be at a down
level. Partnerships are managed by every partner since all of them have a right to participate
actively in affair management in the business. They all enjoy the authority to unite the firm and
the rest of the partners for their actions in the course of business. A sole proprietorship type of
business is managed by individuals and the ow