Joe and Mia are 50:50 partners in the J&M Shop. The Shop has experienced financial difficulty over the past three years. After liquidating all its assets, the Shop still owes $15,000 to creditors. Joe has $20,000 of net worth and Mia has $5,000 of net worth. Creditors can collect
A) $10,000 from Joe and $5,000 from Mia.
B) $15,000 from Joe and $5,000 from Mia.
C) $15,000 from Joe and $0 from Mia.
D) $0 from Joe and $0 from Mia (since the partnership has no assets).
E) either a or c.

Question

Quizplus · Accepted Answer

In a 50:50 partnership, both partners are equally liable for the debts of the business. However, creditors can collect based on the individual net worth of the partners. Since Joe has $20,000 and Mia has $5,000, creditors could opt to collect the full $15,000 from Joe (option C), considering his ability to cover the entire debt, or they could collect $10,000 from Joe and $5,000 from Mia (option A), splitting the debt based on their available net worth.

Joe and Mia Are 50:50 Partners in the J&M Shop