Question

Jessica Hatcher has a small business as a distributor of children's swimwear called "Kiddie Kovers."

Jessica has done well on her own but was threatened six months ago with a lawsuit against "Kiddie Kovers" from a client. The lawsuit was due to an incorrect shipment that could not be replaced due to bankruptcy of the original manufacturer. Even though the court could rule against Kiddie Kovers Jessica is still not concerned about losing any of her personal assets (home, car, furniture, etc.) in the lawsuit.

What form of business is Jessica likely to be operating?

	A.	Sole proprietorship
	B.	General Partnership
	C.	Corporation
	D.	None of the other answers

Answer 1

Based on the information available, Jessica is not concerned above losing any of her personal assets like home, car, furniture etc.

The form of business that Jessica is likely to be operating is Option C - Corporation. Under the corporation form of business the debtors do not have the ability to recover any assets from the owner of a business. Once the assets of the corporation is exhausted, the debts would not be able to recover any assets from that of the owners.

Option A and Option B are incorrect because the personal assets of the sole proprietor and the partners are personally liable for what happens to a sole proprietorship or partnership incase there are losses or bankruptcy occuring.

Option D is incorrect as we have the answer at Option C and hence this is not valid.

Please let me know if you have any questions via comments :)