You’re the sole owner of Duarte Spring Company; you paid $200K for the business

Question

You’re the sole owner of Duarte Spring Company; you paid $200K for the business when you acquired the firm five years ago. Duarte is a manufacturer of high-end springs used by major aerospace and aircraft manufacturing companies. Six months ago, you completed your largest project to date--a $500,000 order delivered to Boeing Corporation. Regrettably, you just received notice from Boeing’s lawyers reporting that they incurred a $50 million loss because your part failed and forced Boeing to miss key delivery dates of its new jumbo jet for customers. What is the dollar amount your personal loss exposure if Duarte Spring Company is a) a sole proprietorship, and b) if it is a C-Corporation, and explain why?

Explanation / Answer

Ans

Ans Sole Propreitorship Amount of Demand 50 Mn Less Networth of the business .2 Mn Personal Loss Exposure 49.8 Ans C-Corporation Nil C-Corporation is a separate legal entity distinct from the share holder , having the liability limited to the net worth.

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