Joe Smith Owns a Book Store as the Sole Proprietor

question 114

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) The book store assets will only be available to the bank if the book store is operated by Smith in conjunction with the hotel.
• B) 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.
• C) Because of the concept of limited liability, he can lose only what he has invested in the hotel.
• D) 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.
• E) The bank can look to the assets of the book store to pay off the debt.

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Definitions:

Implementation

The execution of a plan, idea, or policy to ensure that its intended effects are fully realized in practice.

Innovation

The process of introducing new ideas, devices, or methods to create value or solve problems, often leading to improvements in efficiency, products, or services.

Locus of Control

A psychological concept referring to the degree to which people believe they have control over the outcome of events in their lives, as opposed to external forces beyond their control.

Own Efforts

The personal endeavor or work done by an individual to achieve a goal without relying on the assistance of others.