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 the following situation.

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.

Question

Business

PBJ

14 April, 16:33

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 the following situation.

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.

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Answers (1)

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Declan · Answer 1

1) If Southwest Development Company is a sole proprietorship owned by Ms. Harper then Ms. Harper has unlimited liability in the business which means that creditors can claim against her personal assets.

2) If Southwest Development Company is a 50-50 partnership of Ms. Harper and Christopher Black then Ms. Harper has unlimited liability in the business which means creditors can claim against her personal assets. (same like number 1)

3) If Southwest Development Company is a corporation then Ms. Harper has limited liability in the business which guarantees that Ms. Harper cannot lose more than the $25,000 she invested.