Scenario-Based
Jerry Foster is a sole proprietorship who owns a canoe renting business.Jerry's
employee, Terry Gibbs, greets customers at the company's office, loads the
customers and their rented canoes onto a van, provides them with safety
instructions and drives them upstream.Once unloaded the canoers are on their
own to float back to the company's office to check in.Although there have been
minor accidents, no one has drowned in the nine years the business has been in
operation.Jerry plans to add kayaks and rubber rafts next year.The scenery is
beautiful and each day people see wild animals come down to the water.
-If Jerry wanted to bring Terry into the business, and he was concerned about the cost of changing his form of organization, what legal form of organization
Would he most likely switch to?
A)corporation
B)partnership
C)joint venture
D)sole proprietorship

Question

Quizplus · Accepted Answer

If Jerry wants to bring Terry into the business as a co-owner, the most logical legal form of organization would be a partnership. This would allow both Jerry and Terry to share the profits and losses of the business and also share the liability. Switching to a corporation would be a costly and complex process, and a joint venture is usually a temporary partnership formed for a specific project. Remaining as a sole proprietorship wouldn't allow for shared ownership of the business.

Scenario-Based Jerry Foster Is a Sole Proprietorship Who Owns a Canoe