The waitress set down a plate of nachos and two pints of beer in front of Stan

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The waitress set down a plate of nachos and two pints of beer in front of Stan and his old college buddy, Ron Ebbers. Ever since they’d run into each other at Stan’s Subway restaurant, the two had rekindled their friendship over beer and nachos at a local restaurant.

“Sales still on the up and up?” Ron asked Stan. “Yep. It just doesn’t seem to matter how weak the economy is,” said Stan. “People will always want a sandwich that’s healthy, great tasting, and a good value.”

And now,” Stan lifted a glass, “ salu—a toast—because as of today I’m a corporation!” “Cheers, Stan the Man!” exclaimed Ron and clinked Stan’s beer mug. “But doesn’t incorporating cost you more money in legal fees and taxes?” “Well, that may be true, but if I don’t incorporate and anything goes wrong or some wacko sues me, it could cost me my shirt! Now I have limited liability, but I still pay wages to my employees, send in my royalty fees to Subway, and muchos profits still go to me.”

“Maybe I should buy stock in Subway,” Ron interrupted. “I’ve been dabbling in the market lately and Subway seems like a good bet!” “Unfortunately, you can’t buy stock in Subway,” said Stan. “Doctor’s Associates, the corporation that owns the Subway brand, is privately owned by the founders Fred DeLuca and Dr. Peter Buck.

“Doctor’s Associates?” Stan exclaimed. “That’s strange. I know the food has helped people lose weight and eat healthy, but is Subway run by a health-care outfit?”

“No, it’s actually kind of interesting. In 1965 Fred DeLuca was just a teenager who wanted to go to college and become a doctor, but he didn’t have enough money.

Then his family friend, Peter Buck, loaned him the money to start a submarine sandwich joint. DeLuca, of course, never did become a doctor, but Peter Buck holds a Ph.D. in nuclear physics, so they called themselves Doctor’s Associates—they’re the ‘doctors’ and we franchisees are the ‘associates.’”

“I guess we all have dreams that we don’t carry out,” Ron mused. “Hey, don’t look so triste, amigo. I know you’re stuck in a dead-end job now, but maybe now is the time to think about new opportunities.”

“Whaddaya mean?” Ron asked.

“There’s a great space on Alameda Avenue on the other side of Los Palmos—near that fancy new apartment complex. I’ve been thinking of eventually opening up another store, but I don’t want to go it alone. However, I might consider going into a partnership with you to own Subway number 2.”

“Well, given the liability risks you just mentioned—which I assume apply to partnerships as well as sole proprietorships, what about a corporation?” said Ron eagerly. “You could be the majority shareholder and I could have a smaller interest in the restaurant until I learn the ropes and eventually buy you out.”

“Whoa there. Let’s not talk about buying anyone out just yet,” laughed Stan. “Before you do anything—if you’re serious about being a Subway owner—you’ll need to go to Subway University.”

Ron raised his glass, “Salute.”

“No man, salud,” corrected Stan. “A toast. To opportunidades del futuro y amistad. To future opportunities and friendship.”

1. What are all the advantages and disadvantages of forming a corporation?

2. What do you think is the best way for Stan and Ron to own a Subway restaurant jointly? Partnership or corporation? Why?