Please help explain.

Mike Derrick and Juan Nunez currently run a small general contractor business that performs miscellaneous services, such as shoveling snow and fixing broken signs, for strip malls. Mike is a nonresident alien of Canada, so the pair has always been concerned about officially forming a company. Juan's sister, Rebecca, has deep pockets and sees the potential in Juan and Mike's operation. She approached Juan and Mike about investing in the company. Rebecca has great connections with major retailers and tells the two that she can ensure they receive large contracts if they incorporate. Additionally, she will team up with them to provide a large amount of startup capital in return for guaranteed returns on her investment. Mike does some research on the internet and determines that forming an S corporation is all the rage. Juan comes to you for help. How do you advise Juan?