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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Definitions:

Leadership PACs

Political action committees established by politicians to fundraise and spend money to influence elections, separate from their campaign.

Fundraising

The process of gathering voluntary financial contributions by engaging individuals, businesses, charitable foundations, or governmental agencies.

Speaker of the House

The presiding officer of the United States House of Representatives, responsible for maintaining order and managing the legislative process in the House.

Power of Recognition

The authority of a state to acknowledge and accept the legal existence of another state or government.