Liability comparisons Merideth Harper has invested $25,000 in Southwest Developm

Question

Liability comparisons Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments, if any, by Ms. Harper in each of the following situations. a. Southwest Development Company is a sole proprietorship owned by Ms. Harper. b. Southwest Development Company is a 50 - 50 partnership of Ms. Harper and Christopher Black. c. Southwest Development Company is a corporation. a. If Southwest Development Company is a sole proprietorship owned by Ms. Harper,: (Select the best answer below.) A. Ms. Harper has unlimited liability, which means creditors can only claim against the $25,000 she invested. B. Ms. Harper has limited liability, which is the amount of $60,000 in unpaid debts. C. Ms. Harper has limited liability, which guarantees that she cannot lose more than the $25,000 she invested. D. Ms. Harper has unlimited liability, which means creditors can claim against her personal assets.

Explanation / Answer

Solution:

Southwest Development Company is a sole proprietorship owned by Ms. Harper

Answer would be -

D. Ms. Harper has unlimited liability, which means creditor can claim against her personal assets.

As, sole proprietor has unlimited liability, it is an issue of concern of sole proprietorship

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