Question
Bertha was an enterprising young business student who financed her university education by refereeing various recreational hockey leagues around the city.Her long-term career plan upon
Bertha was an enterprising young business student who financed her university education by refereeing various recreational hockey leagues around the city.Her long-term career plan upon graduating with a Bachelor of Commerce Degree was to one day operate her own marketing firm.Unfortunately, upon graduation, Bertha found herself with few employment opportunities in her field. Not being the type to sit idle, Bertha accepted a job managing one of the hockey leagues.She quickly came to realize that there was significant confusion with scheduling ice time, resulting in poor team attendance. She wondered whether a computer program could improve the process.
Not being particularly computer savvy, Bertha contacted an old roommate Beverley, who had recently graduated with a Computer Engineering Degree. In their free time, Bertha and Beverley ultimately developed a team management computer program that permitted players' contact information and team schedules and rosters to be uploaded from a web platform making information readily available to managers, coaches and players. For a fee, they took over the hockey league's scheduling using the team management computer program.
The team management computer program has been quite successful and Bertha and Beverley have since taken over the scheduling for a number of other sports leagues. Still more leagues have contacted them from across the country looking to pay for the service.
Though they do not have any formal agreement, Beverley manages the technical side of the service and Bertha manages the business side including invoicing, accounts receivable and marketing. This arrangement had been working well. But now, with the rapid growth of their business and the need for additional financing and help in managing the business, Bertha and Beverley recognize that they may have to reconsider the form of business operation that best suits their needs.
a.What form of business organization are Beverley and Bertha presently operating? Briefly explain your answer. [1 point]
b. Propose another form of business organization that may be more appropriate to accommodate Bertha and Beverley's business going forward. Discuss the potential advantages of your proposed form of business organization over their current form of business organization. [5 points]
Now, suppose that Bertha and Beverley decide to form a corporation to carry on the business.
c.Advise Bertha and Beverley on the benefits of incorporating as a closely-held corporation (or private corporation) instead of a widely-held corporation (or public corporation). [2 points]
d.If Bertha is appointed Chief Executive Officer and Beverley is appointed Chief Operating Officer of the new corporationwhat legal duties would they have in their new roles? [2 points]
e.What are Bertha and Beverley's two main options for financing the corporation? What are the advantages and disadvantages of each form of financing? [4 points]
Now, suppose the corporation decides to seek a loan from the bank. The corporation does not have many assets, other than the team management computer program.
f. Why might the bank require personal guarantees from Bertha and Beverley to secure the loan and what would be the effect of this? [2 points]
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