Ben and Brian are opening a paint store. There are no competing paint stores in the...

Transcribed Image Text:

Ben and Brian are opening a paint store. There are no competing paint stores in the area. They must decide how to organize the business. They anticipate profits of $450,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Read the requirements. Requirement 1. What is the main advantage they gain by selecting a corporate form of business now? By selecting the corporate form of business now, Ben and Brian will A. avoid the double taxation that affects partnerships and proprietorships. B. be able to transfer ownership without affecting the continuity of the company. C. benefit from the ability to exercise mutual agency within a corporation. Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue stock because Requirement 3. If they decide to issue $2 par common stock and anticipate an initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? The number of shares to issue in order to raise $3,500,000 is Requirements - 1. What is the main advantage they gain by selecting a corporate form of business now? 2. Would you recommend they initially issue preferred or common stock? Why? 3. If they decide to issue $2 par common stock and anticipate an initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue Requirement 3. If they decide to issue $2 par common s The number of shares to issue in order to raise $3,500,0 stock because common n initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? preferred Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue stock because Requirement 3. If they decide to issue $2 par common stock and anticipate an initia The number of shares to issue in order to raise $3,500,000 is a corporation can only issue a small amount of common stock a share of common stock costs more than a share of preferred stock a share of preferred stock costs more than a share of common stock dividends generally must be paid on preferred stock se $3,500,000? Ben and Brian are opening a paint store. There are no competing paint stores in the area. They must decide how to organize the business. They anticipate profits of $450,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Read the requirements. Requirement 1. What is the main advantage they gain by selecting a corporate form of business now? By selecting the corporate form of business now, Ben and Brian will A. avoid the double taxation that affects partnerships and proprietorships. B. be able to transfer ownership without affecting the continuity of the company. C. benefit from the ability to exercise mutual agency within a corporation. Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue stock because Requirement 3. If they decide to issue $2 par common stock and anticipate an initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? The number of shares to issue in order to raise $3,500,000 is Requirements - 1. What is the main advantage they gain by selecting a corporate form of business now? 2. Would you recommend they initially issue preferred or common stock? Why? 3. If they decide to issue $2 par common stock and anticipate an initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue Requirement 3. If they decide to issue $2 par common s The number of shares to issue in order to raise $3,500,0 stock because common n initial market price of $100 per share, how many shares will they need to issue to raise $3,500,000? preferred Requirement 2. Would you recommend they initially issue preferred or common stock? Why? You would recommend that Ben and Brian initially issue stock because Requirement 3. If they decide to issue $2 par common stock and anticipate an initia The number of shares to issue in order to raise $3,500,000 is a corporation can only issue a small amount of common stock a share of common stock costs more than a share of preferred stock a share of preferred stock costs more than a share of common stock dividends generally must be paid on preferred stock se $3,500,000?