Herb Jones started making tooled leather belts as a hobby. Later, he learned how to cast bronze belt buckles. He had little trouble selling them to friends. He was taking some art classes while seeking a degree in business at the local college. His belts, which he sold on weekends at craft shows, paid his tuition and provided spending money. Now he has been able to get a few men’s clothing stores to stock his belts on a consignment basis. Demand has increased beyond his ability to fill it. As he completes his program at the college, he decides he would like to get into the business of making and selling belts and other leather goods. 

He learns of the availability of a small shop location in a popular shopping mall. A friend, Bill Williams, who has another year to go at the college, is willing to help him in his spare time. Suburban Bank and Trust Company is willing to lend Herb $8,000, the amount he thinks he needs to pay rent for one year, to buy a stock of leather and brass from which to make the belts, and to pay Bill to work weekends for three months. The loan is conditional on Herb’s father cosigning the note. Herb’s Uncle Joe, who works for a large corporation, suggests that Herb should incorporate the business. Do you agree?