CJ and Danny Have Incorporated and Obtained a $100,000 Loan

question 37

Multiple Choice

CJ and Danny have incorporated and obtained a $100,000 loan in their corporate name.The loan is payable with interest over five years.After paying on the loan regularly for two years,the business falters due to the economy,and CJ and Danny default on the loan.Their business has no assets.Which of the following statements best describes CJ and Danny's liability in this case?

• A) CJ and Danny are jointly and severally liable for the entire balance.
• B) CJ and Danny are each individually liable for one quarter of the debt, with the corporation liable for the remaining half.
• C) CJ and Danny are each individually liable for one-third of the debt, with the corporation liable for the remaining third.
• D) CJ and Danny have no personal liability for the debt unless they pledged personal assets as collateral or signed a personal guarantee.

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Definitions:

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