Reference no: EM132403863

Let's assume that John decides that, despite good reasons for other structures, he will incorporate the business and operate the bistro as "Strawberry Fields Bistro Inc.".

Paul does not want to be active in the business; consequently, John and Ringo will be the sole two directors. John is appointed as the "Chief Operating Officer" and Ringo is appointed as the "Head Chef". They are each paid a salary since they are officers/employees of Strawberry Fields Bistro.

Paul is issued 100 preferred shares (the preferred shares are non-voting, with a right to a dividend).

John and Ringo are each issued 100 common shares (the common shares have voting rights, with no right to a dividend).

Assume you are advising Paul. Is this corporation structure (as described in the Option #2 narrative) favourable for him? Why or why not? Explain your answer.