Andrew and Mike are opening a couture clothing boutique. There are no competing couture clothing boutiques in the area. They must decide how to organize the business. They anticipate profits of $$200,000$ 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, Andrew and Mike will

A$.$ benefit from the ability to exercise mutual agency within a corporation.

B$.$ be able to transfer ownership without affecting the continuity of the company.

C$.$ avoid the double taxation that affects partnerships and proprietorships.

Requirements

What is the main advantage they gain by selecting a corporate form of business now?

Would you recommend they initially issue preferred or common stock? Why?

If they decide to issue $$1$ par common stock and anticipate an initial market price of $$40$ per share, how many shares will they need to issue to raise $$2,250,000?$