Michigan Residential Builders License Practice Test

What term describes a collaboration of business members to form a larger entity?

1. General partnership

2. Limited partnership

3. Joint venture

4. Sole proprietorship

The correct answer is: Joint venture

The term that describes a collaboration of business members to form a larger entity is a joint venture. This structure refers to an arrangement in which two or more parties come together to undertake a specific business project or to create a new, shared business entity, pooling resources and expertise for mutual benefit. In a joint venture, participants typically share risks, costs, and profits associated with the project or business endeavor. This collaboration can be particularly advantageous as it allows businesses to expand their capabilities, enter new markets, or develop new products without the necessity of a long-term partnership. Each member retains their individual business integrity while benefiting from the shared goals and resources of the venture. Other business structures such as a general partnership or limited partnership involve ongoing business collaborations but do not encapsulate the idea of a temporary, project-based partnership that is characteristic of a joint venture. A sole proprietorship, on the other hand, describes a business owned and operated by a single individual, thus lacking the element of collaboration seen in a joint venture.