business formations - a comparative analysis of proprietorship vs. corporations (3000 words in total)

Project Description:

objective:
• conduct an analysis of the various ways of establishing and operating a business, considering the tax ramifications of formation.
• using current tax rate structure, analyze each form @ progressive levels of gross revenues (i.e. $45,000; $90,000; $270,000; $640,000; $1,350,000).
• the goal is to maximize wealth accumulation to owner(s) and family, after consideration of all taxes.
• business type: marketing. (students with experience in other types of businesses may request to use a different business model; prior approval required).

methodology:
• compare & contrast the different forms of operating a business.
• corporations would be designated as “closely held”. include “s” corporation status as well as “c” in your analysis when examining corporate structure.
• analyze each structure independently through all levels of income for the tax consequences of the particular formation. use of a spreadsheet for the analysis is required.
• develop scenario that is progressive (i.e. as the company increases its gross revenues at levels specified above); identify detailed expenses (i.e. chart of account level) associated with the type of business being studied at each level of revenue; include payment (either draw or salary) for owners.
• examine impact on business and recipient of dividend payments to corporate owners.
• after analyzing and presenting each separately, consider “crosswalks” from one form of business to another.
• analysis must include personal recommendation with supporting rationale as to the formation selected.

• the rubric that will be utilized in the evaluation process is provided on the website.

discussion

• the primary focus of this project should be a comparative analysis of the after tax benefits of choosing a particular business type of business formation, at various levels of income.
• the emphasis should be on the numbers found in your analysis of the tax effect on the specific business you select,
• just typing pages of data that you might find on the web describing the different formations in a general context is not acceptable.
• in essence, your analysis should cover a business for 5 successive years with income increasing yearly, as stated in the original guidance above.
• before you do a lot of work writing, you should first think through how you would organize your company, how your company would be making its revenue, what type of expenses would be typically involved in the type of company you have chosen.
• preparing a simple chart of accounts might help you.
• just providing this chart is not the solution (i.e. not acceptable)
• beginning as a proprietorship is often the easiest way to begin, although not mandatory.
• take this form all through the various levels of gross income given to you. in each analysis you should be looking to “see” how much do you, as a family entity, actually keep after taxes.
• repeat this process for each business formation.
• in any business, there will be expenses. as most have learned in accounting principles, the only reason that expenses are incurred in a business is to generate (additional) income.
• there are no expenses listed for this business.
• it is your job to come up with the different expense categories & amounts according to the type of business you will be writing about.
• the different formations will have differing expenses. for example, if you incorporate, you (& your spouse, if appropriate) may each be paid a salary by the corporation for work performed; the corporation may deduct these salary expense items.
• as you will recall from your basic accounting course, this is not so in a proprietorship; there you may draw monies out but may not deduct that amount as an expense item.
• the revenues that are listed as gross revenues for the year. you should describe how these revenues were earned (i.e. how the revenues flowed into the company. as well, if the company has multiple sources of revenue, these should be differentiated.
• each business type should be analyzed at each level of increasing income, arriving at a taxable income for the business for that year.
• for example, when doing the corporate form of business formation, you would start at $45,000 and work your way up with separate, successive analyses to the upper level of $1,350,000. you must show me this analysis. microsoft excel is a good program for this analysis work/product.
• after all your analyses are completed, you should then decide (& tell me in your paper) which form of organization you would choose & the reasons why. your studies should investigate ideas such as: whether it is smarter (financially) to start out as a proprietorship and remain that way; or start out as a proprietorship and change to another form, such as a corporation; or perhaps, you would want to start out as a corporation and remain that way.
• note: many students find it easier to write narrative after they have done the analysis, letting the numbers guide the words rather than trying to fit numbers into a previously written narrative.
• in this project, liability is not a factor. hence, you may not use the “limited liability issue” of a corporation as a sole basis for choosing the corporate form.
• you are encouraged to do extensive research. sites like “findlaw.com & bizfilings.com” are good starting points. however, avoid the “copy & paste” temptation.
• i do not want you to copy and paste ‘mounds’ of information on “how to” form a corporation, etc; this is not the purpose of the paper & is often a fatal error within the inferior papers i have read.
• these sites (and others) do contain some valuable information that you may use as your own knowledge base.
• one tidbit of information that can be found at these sites that will be useful is the cost of setting up a corporate form. note: make sure you specify which state you are choosing to incorporate under and why you chose that state.


administrative: your paper should:
• use apa methodology.
• contain a “works cited” page..
o if the work is listed in this page, it must have been cited within the paper; if someone else’s work is used within the paper, it must be cited.
• executive summary – (model can be found at www.cato.org,
o the summary is written last but positioned at the front of the paper.
o your paper becomes the detail for what you summarize.
• numerical analysis should be compiled using excel worksheets
o make sure the formatting is such that all sheets may be printed easily on a single page; failure to properly organize excel workbooks/worksheets is a detractor from a superior grade on this paper.
• excluding the above pages, body of paper should be not less than 5 pages in length.
• use new times roman, 12
• charts and graphs may be included as supplementary pages
Skills Required:
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Price Type: Negotiable

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