Nerissa$$Smith

has invested

$ $47$ comma $000$$$47,000$

in

Northeast ProductionsNortheast$$Productions

Company. The firm has recently declared bankruptcy and has

$ $108$ comma $000$$$108,000$

in unpaid debts. Explain the nature of

NerissaNerissa$\text{'}$s

personal liabilit$,$ if$$ any, in each of the following situations.

a$.$

Northeast ProductionsNortheast$$Productions

Company is a sole proprietorship owned by Ms$.$

SmithSmith.

b$.$

Northeast ProductionsNortheast$$Productions

Company is a$50-50$ general partnership of

Nerissa SmithNerissa$$Smith

and

Roger BrownRoger$$Brown$.$

c$.$

Northeast ProductionsNortheast$$Productions

Company is a limited partnership where

Nerissa SmithNerissa$$Smith

is a limited

partner.

d$.$

Northeast ProductionsNortheast$$Productions

Company is a

corporation.

Question content area bottom

Part $1$

a$.$If

Northeast ProductionsNortheast$$Productions

Company is a sole proprietorship owned by Ms$.$

SmithSmith$,$:

$($Select the best answer$$ below.$)$

A$.$

Ms$.$

SmithSmith

has unlimited$$ liability, which means creditors can only claim against the

$ $47$ comma $000$$$47,000$

she invested.

Your answer is not correct.

B$.$

Ms$.$

SmithSmith

has limited$$ liability, which is the amount of

$ $108$ comma $000$$$108,000$

in unpaid debts.

C$.$

Ms$.$

SmithSmith

has limited$$ liability, which guarantees that she cannot lose more than the

$ $47$ comma $000$$$47,000$

she invested.

D$.$

Ms$.$

SmithSmith

has lost her

$ $47$ comma $000$$$47,000$

investment and has unlimited personal$$ liability, so she is also liable for the$$ firm's

$ $108$ comma $000$$$108,000$

in unpaid debts.

This is the correct answer.

Part $2$

b$.$If

Northeast ProductionsNortheast$$Productions

Company is a$50-50$ partnership of

Nerissa SmithNerissa$$Smith

and

Roger BrownRoger$$Brown$,$:

$($Select the best answer$$ below.$)$

A$.$

Ms$.$

SmithSmith

has limited$$ liability, which is

$ $54$ comma $000$$$54,000,$

or half of the

$ $108$ comma $000$$$108,000$

in unpaid debts.

B$.$

Ms$.$

SmithSmith

has limited$$ liability, which guarantees that she cannot lose more than the

$ $47$ comma $000$$$47,000$

she invested.

C$.$

Ms$.$

SmithSmith

has unlimited$$ liability, which means creditors can only claim against the

$ $47$ comma $000$$$47,000$

she invested.

D$.$

Ms$.$

SmithSmith

has lost her

$ $47$ comma $000$$$47,000$

investment amd shares unlimited liability with her partner. $$Initially$,$ Ms$.$ Smith is liable for$$

$ $54$ comma $000$$$54,000$

$(50\%$ of total unpaid$$ debts$).$ But if her partner cannot cover half the$$ debt, Ms$.$ Smith is liable for the full amount.