Mini Case 6-1: "Today, You Gotta' Be a Corporation

question 32

Essay

Mini Case 6-1: "Today, You Gotta' Be a Corporation"
Duke has been a successful used car dealer for 25 years in the same location, operating as a proprietorship. In those 25 years, he has expanded his operation and become the largest independent car dealer in a city of 85,000 people. Few people in town can boast of a business reputation better than Duke's. As he says, "I've always done business in a fair and honest fashion, and I've tried to give my customers an honest deal. The public has responded well, and last year the business revenue increased to an all-time high of $830,000."
As the business has grown, so have Duke's liabilities. On a given day, Duke will have cars worth from $350,000 to $450,000 as inventory on the lot. "Twenty years ago, if I'd asked the bank for a line of credit of $200,000, they'd have tossed me out the front door. There is no question that today business is different."
Duke's only daughter recently married a garage mechanic who has worked in the area for the past three years. Though Duke thinks the boy is certainly nice enough, he does not believe he is very smart. "The kid sure knows how to fix a car, but that's as far as it goes," says Duke. "On my last visit to the accountant, he suggested I consider incorporating. I guess he knows what he's talking about. That's all you hear today - 'you gotta be a corporation.' I guess he's right. But, to tell you the truth, I don't know."
-Would you recommend Duke establish an S corporation? What conditions would he have to meet?

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Definitions:

Otoscope

A medical device used to look into the ears, allowing for the examination of the ear canal and tympanic membrane.

Gingival Margin

The edge of the gum tissue that surrounds the teeth, marking the boundary between the crown of the tooth and the beginning of the gum.

Ciliated Mucous Membrane

A type of mucous membrane that contains hair-like structures called cilia, which help to move mucus and trapped particles.

Nasal Mucosa

The moist, protective lining inside the nose that helps filter, warm, and moisturize the air we breathe, and is also involved in immune responses.