Integrative Problems

6-11 Marty Kimble, who retired many years ago after winning a huge lottery jackpot, wants to start a new company that will sell authentic sports memorabilia. He plans to name the company Pro Athlete Remembrances, or PAR for short. Marty is still in the planning stages, so he has a few questions about how PAR should be organized when he starts the business and what he should do if the company becomes extremely successful in the future. Marty has little knowledge of finance concepts. To answer his questions and learn more about finance in general, Mr. Kimble has hired Sunshine Business Consultants (SBC). Assume that you are a new employee of SBC and your boss has asked you to answer the following questions for Mr. Kimble:

a. What are the alternative forms of business organization? What are the advantages and disadvantages of each?

b. What form of business organization do you recommend that Mr. Kimble use when starting PAR? Why?

c. Assume that PAR is organized as a proprietorship when it starts business. If PAR becomes extremely successful and grows substantially, would you recommend that Mr. Kimble change the business organization to either a partnership or a corporation? Explain your answer.

d. What goal should Mr. Kimble pursue when operating PAR?

e. Assume that PAR is organized as a proprietorship when it starts business and that Mr. Kimble plans to convert the business to a corporation at some point in the future. What are some potential problems that Mr. Kimble, as one of the owners, might face after converting to a corporation? Discuss some solutions to these potential problems.

f. Mr. Kimble would like PAR to grow so that at some point in the future the company can conduct business in other countries. Why do firms go global?

g. Discuss any differences and problems that Mr. Kimble should be aware of when conducting business in foreign markets.