Partnerships Quick Check

Question

4 of 54 of 5 Items
Question
Jonathan owns and operates a successful sole proprietorship. A friend, who owns a similar business, suggests that they combine their businesses and form a new partnership. Which of the following should Jonathan consider before making a decision?(1 point)
Responses

When Jonathan and his friend pool their resources, they will each gain some control over the decision-making process; however, the new business will likely grow slower than the sole proprietorship.
When Jonathan and his friend pool their resources, they will each gain some control over the decision-making process; however, the new business will likely grow slower than the sole proprietorship.

When Jonathan and his friend pool their resources, the business will likely grow faster than it otherwise would; however, the significant regulatory burden of operating a partnership would be far greater than that of a sole proprietorship.
When Jonathan and his friend pool their resources, the business will likely grow faster than it otherwise would; however, the significant regulatory burden of operating a partnership would be far greater than that of a sole proprietorship.

Jonathan will gain more control over decision-making by partnering with his friend; however, the significant regulatory burden of operating a partnership would be far greater than that of a sole proprietorship.
Jonathan will gain more control over decision-making by partnering with his friend; however, the significant regulatory burden of operating a partnership would be far greater than that of a sole proprietorship.

When Jonathan and his friend pool their resources, the business will likely grow faster than it otherwise would; however, Jonathan will lose some of the control over decision-making that he currently enjoys.

Answer 1

When considering the potential partnership with his friend, Jonathan should weigh the implications of combining their businesses. The most relevant points for Jonathan to consider would include:

1. Loss of Control: By entering into a partnership, Jonathan would share decision-making authority with his friend, which means he would lose some control over his business decisions compared to operating as a sole proprietor.

2. Business Growth Potential: Pooling resources with his friend may provide synergies that could foster faster growth than either business could achieve individually.

3. Regulatory Burden: Operating as a partnership may involve more regulatory requirements and complexity compared to the relatively straightforward structure of a sole proprietorship.

Based on these considerations, the most appropriate response Jonathan should focus on is:

"When Jonathan and his friend pool their resources, the business will likely grow faster than it otherwise would; however, Jonathan will lose some of the control over decision-making that he currently enjoys."

This answer encapsulates the essential trade-off Jonathan faces in moving from running a sole proprietorship to entering into a partnership.