Question

Merideth Harper has invested​ $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has​ $60,000 in unpaid debts. Explain the nature of​ payments, if​ any, by Ms. Harper in the following situation.

a) Southwest Development Company is a sole proprietorship owned by Ms. Harper.
b) Southwest Development Company is a 50–50 partnership of Ms. Harper and Christopher Black.
c) Southwest Development Company is a corporation.

Answer 1

Step-by-step explanation:

1) If Southwest Development Company is a sole proprietorship owned by Ms.​ Harper then Ms. Harper has unlimited​ liability in the business which means that creditors can claim against her personal assets.

2) If Southwest Development Company is a​ 50-50 partnership of Ms. Harper and Christopher​ Black then Ms. Harper has unlimited​ liability in the business which means creditors can claim against her personal assets.(same like number 1)

3) If Southwest Development Company is a​ corporation then Ms. Harper has limited liability in the business which guarantees that Ms. Harper cannot lose more than the $25,000 she invested.