Charlie Driver was rather pleased with the results for the 3C Company’s first year, particularly since it was operating only part time. He also discovered that he enjoyed the catering business. In fact he has decided to continue one more year with the 3C Company, finish his marketing courses, and meanwhile look for a suitable restaurant that he could operate.
Towards the end of the second year, he found what he was looking for an 84-seat table service restaurant that had been closed for about 3 months. The present owner wishes to retire and is prepared to lease the restaurant to Charlie for five years. The first year’s rent is $24,000, to be increased by 10 percent a year over the preceding year for each of the following four years. Since the restaurant’s furniture and equipment are quite old and have little value, the owner agrees that Charlie can trade it in for whatever he can get toward new furniture and equipment. Charlie negotiated with a local supplier to purchase new furniture and equipment at a cost of $225,120. The furniture and equipment are estimated to have a five-year life.
Charlie realized that for tax and other reasons he should incorporate a company to operate the restaurant (even though he is going to continue with the same restaurant name) and any future endeavors he undertakes. He, therefore, incorporated a company under the name of Charles’s Classic Cuisine Corporation. We shall simplify that to the 4C Company.