Which of the following statements is correct?
A) A shareholder's liability to contribute to the debts of an insolvent company is limited.
B) The owner of a sole proprietorship is not legally liable for its debts.
C) Special legal requirements must be met when forming a partnership.
D) A partnership is a separate legal entity.

Question

Quizplus · Accepted Answer

Shareholders' liability is limited to the amount they have invested in the company. So, they are not directly responsible for the debts of an insolvent company beyond that amount.

Answer: B
 In a sole proprietorship, the owner is personally liable for the debts and obligations of the business.

Answer: C
 Forming a partnership involves meeting specific legal requirements, such as drafting a partnership agreement, registering the partnership, and obtaining any necessary licenses and permits.

Answer: D
 A partnership is not a separate legal entity from its partners. The partners are jointly and severally liable for the partnership's debts and obligations.

Which of the Following Statements Is Correct