Question

Assume the football team is set up as a C corporation and that Lenny, Sarah, and Sam are the shareholders. The team is sued for negligence because an individual who turned to see the quarterback running naked crashed her car. Which of the following is true?

a.The corporation may have liability, but not the individual owners.
b.The individual owners may have liability, but not the corporation itself.
c.The corporation may have liability as well as the owners individually, but the owners' individual liability is limited to twice their investment in the company.
d.The corporation may have liability as well as the owners individually, and the owners' liability unlimited.

Answer 1

The answer is option A) The corporation may have liability, but not the individual owners.

Step-by-step explanation:

The corporation may have liability, but not the individual owners because it is a C Corporation.

A C Corporation legally separates owners' or shareholders' assets and income from that of the corporation. This helps to limit the liability of investors and firm owners since the most that they can lose in the business's failure is the amount they have invested in it.

So, even if the team get sued for negligence because an individual who turned to see the quarterback running naked crashed her car, the corporation will have liability.