Joe Smith Owns a Book Store as the Sole Proprietor

question 118

Multiple Choice

Joe Smith owns a book store as the sole proprietor. He is also a partner in a hotel, which borrowed $100,000 from the bank. Which of the following statements is true?

• A) Because of the concept of limited liability, he can lose only what he has invested in the hotel.
• B) The book store assets will only be available to the bank if the book store is operated by Smith in conjunction with the hotel.
• C) The bank can look to the assets of the book store to pay off a debt.
• D) The bank can only go after the assets of the book store if Smith was the actual person who negotiated the loan with the bank.
• E) Although the bank can go after Smith's personal assets, they cannot go after the assets of the book store because the book store is a separate legal entity from Smith.

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