Brothers Paul and John and their third partner, George, have successfully launched their surfwear business and have opened a very successful storefront in Los Angeles. They have successfully incorporated their business as Fantastically Innovative Surfing, Inc. and have run the corporation for almost two years now. They have made more than $200,000 in net profit in year one and more than $350,000 in net profit in year two.

In the beginning days of the company, this business was simply a side job for all three individuals. As their business has grown more successful, however, they have realized that their surfwear business could be huge, thanks to Paul's sage business acumen, John's innovative surfwear technology, and George's excellent experience and skills in sales.

Paul has come to you with the following questions and concerns regarding Fantastically Innovating Surfing, Inc. Your responses to each of the following questions should be approximately one to two paragraphs. You should substantiate your responses by providing any appropriate references to the cases and model statutes that we are studying in our course; no outside references are required. You may feel free to incorporate additional facts and assumptions into the hypothetical scenario, as long as you clearly note them.

1.Paul, John, and George have an opportunity to open up a second storefront in San Diego, as a prime location has recently opened up. The dilemma is that their corporation does not have the capital to set up the store and pay rent, as all their cash is tied up in inventory. Lucinda, George's sister, has approached them about the possibility of becoming a fourth investor. John also has a good relationship with his local credit union, the Supremely Successful Credit Union of Southern California (for a possible loan).