Your friend Bryan McNair has come to you for advice. He has a very successful antiques store that had sales of more than $800,000 in the year just ended. He would like to expand and will need to borrow $350,000 to finance an enlarged inventory. He has learned that he can buy the store adjoining his for $250,000 and estimates that $60,000 of renovations would be needed to make the store compatible with his present store. Expansion would mean adding three or four employees to the current two employees.
Bryan's accountant has suggested that he incorporate his business and that Bryan hold all the shares. He has cited several reasons to Bryan, including the benefits of limited liability. Bryan has talked to his banker about the possibility of incorporating; the banker has pointed out that if Bryan does incorporate, the bank will need personal guarantees for any loans Bryan arranges with the bank.
Required
Consider Bryan's situation and discuss the pros and cons of incorporation for Bryan. What would you suggest?