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

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

Quizplus · Accepted Answer

If Jerry wants to bring Terry into the business, he may choose to switch to a partnership as it is a relatively inexpensive and straightforward legal form of organization. In a partnership, two or more people share ownership and responsibilities of the business, which can help to reduce the burden and risk of running the business alone. Jerry and Terry can split the costs and profits of the business, and Terry can also help to manage the day-to-day operations. A corporation or joint venture may be more complex and expensive to set up, whereas staying as a sole proprietorship would mean Jerry would continue to bear all the risks and responsibilities of the business alone.

SCENARIO-BASED Jerry Foster Is a Sole Proprietorship Who Owns a Canoe