Assignment:
Case study
A Question of Incorporation
The Harlow family opened its first motel in 1992. Initially, business was slow. It took almost 11 months to break-even and three years for the Harlows to feel that the operation was going to be a success. They stuck with it and by 1997 they were able to increase the size of the motel from 28 to 50 rooms. They expanded again in 1999, this time to 100 rooms. In each case, the motel's occupancy rate was so high that the Harlows had to turn people away during the months of November to April and the occupancy rate was 85per cent during the other months. By industry standards theirs was one of the most successful motels in the country.
As they entered the 2000s, Harold and Becky Harlow decided that, rather than expanding, they would be better off buying another motel, perhaps in a nearby locale. They chose to hire someone to run their current operation and spend most of their time at the new location until they had it running properly. In 2002 they made their purchase. Like their first motel, the second location was an overwhelming success within a few years. From then on, the Harlows bought a number of new motels. By 2009, they had seven motels with an average of 100 rooms per unit.
During all of this time, Becky and Harold kept their own financial records, bringing in a chartered accountant only once a year to close the books and prepare their income tax returns. Last week the new accountant asked them how long they intended to keep running seven motels. The Harlows told him that they enjoyed the operation and hoped to keep at it for another 10 years, when they planned to sell out and retire.
Harold admitted that trying to keep all of the motels going at the same time was difficult, but noted that he had some excellent managers working for him. The accountant asked him whether he would consider incorporating. ‘If you incorporate', he said, ‘you could sell shares and use the money to buy more motels. Additionally, you could keep some of the shares for yourself so you could maintain control of the operation, sell some for expansion purposes and sell the rest to raise some money you can put aside in a saving account or some conservative investment. That way, if things go bad, you still will have a nest egg built up. ‘The accountant also explained to Harold and Becky that, as a partnership, they are currently responsible for all business debts. With a Corporation, they would have limited liability; that is, if the corporation failed, the creditors could not sue them for their personal assets. In this way, their assets would be protected, so the money the Harlows would get for selling the shares would be safely tucked away.
The Harlows admitted that they had never really considered another form of organization. They always assumed that a partnership was the best form for them. Now they are willing to examine the benefits of a Corporation and they will go ahead and incorporate their business if this approach promises them greater advantages.
QUESTIONS
1. What are the advantages and disadvantages of a partnership?
2. Contrast the advantages and disadvantages of a partnership with those of a corporation.
3. Provide your opinion on whether the Harlows should incorporate.
4. Would the limited liability company option be of value to them? Explain
Assessment 1
Assessment Type: Case Study - individual assessment - 2000 + 10% word report
Purpose: To allow students to develop a critical analysis approach to the development of a business model and business strategy. This assessment relates to Learning Outcomes a and c.
Topic: Please select a case study from the set text. These case studies appear at the end of each chapter and some chapters have multiple case studies.
All students should have selected a case study by week 3 and uploaded the case study to a Padlet wall on the site. This is the name or number of the case study and your name. No two students should chose the same case study and the Padlet wall allows one to sort through all uploaded material to check on this.
Task Details: Using the case scenario as a focus, students are to analyse the situation presented by the case study incorporating content based on researched found in Journal articles, theory from texts and models. An evaluation of the business and the issue should be strongly supported through answering the questions related to the case study.
While you are expected to answer the questions, your need to construct your answers into a professionally presented report as would be expected in today's modern business environment (see below for specific details).
Research Requirements:
Use a minimum of 6 academic journal articles, plus the text supporting your identification of problems and proposals / recommendations to resolve the questions. It is envisaged a Credit grade would require up to14 references with a minimum of 8 academic journals. A Distinction would require up to 18 references with a minimum of 12 academic journals.
To be considered relevant, reference sources should be used correctly to support the discussion, analysis and recommendations, so take care to carefully link the case elements and discussion / analysis to correctly referenced entrepreneurial and business concepts and models. Articles chosen need to be recent (written since at least 2008) and relevant to both the topic and context of the assessment task.
Additional non-academic sources may also be used; however students need to show an understanding of their validity.