Smith's Shoes Is a Failed Business Enterprise, with Debts of $10

question 175

Multiple Choice

Smith's Shoes is a failed business enterprise, with debts of $10 million. Steve Smith has an ownership stake in Smith's shoes. Which of the following statements INCORRECTLY characterizes Steve Smith's legal liability for the debts of Smith's Shoes, depending on the firm's type of business organization?

• A) If Smith's Shoes is a proprietorship, then Steve Smith is fully liable for the entire $10 million in debt of the failed shoe store.
• B) If Steve Smith is a partner in Smith's Shoes, then his legal liability for the debts of Smith Shoes is $10 million divided by the number of partners.
• C) If Smith's Shoes is a corporation in which Steve Smith is a stockholder, then Steve Smith does not need to use any of his wealth to pay the debt because the company has limited liability.
• D) None of the above statements is incorrect.

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