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

question 11

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 a limited liability corporation be any better for Duke? Why or why not?

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Definitions:

Treaty

A formal and legally binding agreement between two or more sovereign states or international organizations.

War of 1812

The War of 1812 was a conflict fought between the United States and Britain over issues including trade restrictions and the impressment of American sailors, culminating in no significant territorial changes.

Status Quo

The existing state or condition of affairs at a particular time, often used in discussions about maintaining or changing current situations.

International Arbitration

A method of resolving disputes between parties from different countries outside the courts, typically by following specific rules in a neutral forum.