Entrepreneurship & Small Businesses

Chuck and Vera decided to start a home remodeling business together. Chuck has been working in carpentry most of his life. He knows the remodeling business inside and out, and he even has some great relationships with major building supply companies in the area. Vera has always been handy, but her primary background is in accounting. She has a CPA license and has spent many years working in the tax department of a major corporation.

Read some of the situations Chuck and Vera encountered during the early years of their business, and answer the questions.

  1. Chuck was originally thinking of starting the business as a sole proprietorship and just hiring Vera as an employee. What are the advantages to him of having Vera as a partner?
  1. In order to get the business going, the business needs a good work truck, tools, and equipment, plus insurance, rent on office space, computers, and much more. What are some potential sources of funding for the start-up costs of the new business?
  1. Before they will give Vera and Chuck a loan, the bank is asking to see a business plan. What are the elements of a business plan, and how long does it typically take to write one?
  1. What skills does the business need that neither Vera nor Chuck seem to have? What are some of their options to meet those needs?
  1. Vera sometimes she thinks she knows more than she does. Last week, she ordered lumber for a project without checking with Chuck. She ordered about twice as much as the project needed. It’s a huge bill, and, since it was Vera’s mistake, the extra cost can’t be passed on to the customer. Chuck just inherited a good bit of money from his late Aunt Louise. Can the lumber company come after Chuck’s inheritance to get the bill paid? Explain.
  1. In spite of the challenges, Vera and Chuck had a profitable year. Do they have to split the profits equally? Explain.
  1. The business is expanding, so they decide to hire some additional carpenters as employees. Now that Chuck is a manager, what are the four functions he must fulfill? For each function, give an example of a task that would fall under that function.
  1. One of the new employees, Jack, fell off a ladder yesterday. Fortunately, his injuries were minor, but suppose Jack had been seriously hurt or killed. Could Jack (or his family) sue Vera and Chuck personally? Why or why not?
  1. Jack’s accident has started Vera worrying. She’s thinking about incorporating the business. What are the advantages and disadvantages of incorporation?
  1. The business did well for the first couple of years, but now, the economy is in a recession. The business is piling up debts, and there’s very little work. Chuck wasn’t sure about incorporation when Vera first suggested it, but now he’s glad they did it. Why?
  1. The business survived the recession, but Vera is over Chuck! They are constantly on each other’s nerves. Everything about him is annoying, even the way he chews his food. She quits and gets a job working for a tax attorney in another part of the country. However, she still owns 45% of the shares of the business she and Chuck started. (Chuck owns 40%, and Chuck’s brother owns 15%.) Even though she no longer works there, does she have a say in the decisions of the business? Will she continue to get a share of the profits? Explain.