Question

Slate Company sells online sales platforms to small businesses. Its strengths are in choosing and setting up the appropriate platform for each business, but it is not as adept at providing customers with technical support for the platforms. Brick Inc. specializes in technical support for online sales platforms. The two companies have decided to enter into a joint venture. Which of the following ownership arrangements would be most likely?

a.A new company will be formed. Slate Company will own 60 percent, and Brick Inc. will own 40 percent.
b.Slate Company will own 60 percent and Brick Inc. will own 40 percent of the venture, but a new company will not be formed.
c.A new company will be formed. Slate Company and Brick Inc. will each own 50 percent.
d.Slate Company and Brick Inc. will each own 50 percent of the venture, but a new company will not be formed.

Answer 1

In a joint venture between Slate Company and Brick Inc., forming a new company is the most likely scenario, with ownership percentages reflective of their negotiated contributions, potentially 50/50 or an unequal distribution like 60/40.

Step-by-step explanation:

When Slate Company and Brick Inc. decide to enter into a joint venture, the most likely ownership arrangement would be for a new company to be formed. This is because it allows for a clear segregation of assets, liabilities, and operations between the two companies, while enabling them to work together on a common project. The specific ownership percentage would then depend on the agreement between the two entities. It could be an equal ownership, where Slate Company and Brick Inc. each own 50 percent, or it could be an unequal ownership, such as 60/40 division based on whatever terms they negotiate (for example, capital investment, resources, or expertise each company brings to the joint venture).

An equal ownership arrangement is often a good foundation for a joint venture as it suggests a balanced partnership and investment. However, an unequal distribution, like a 60/40 split, suggests that one party may be providing a greater share of capital, resources, or expertise.