Rachi is a wealthy businessperson with substantial personal assets. One of the businesses she carries on is a health club. She has carried on this business as a sole proprietorship, but she has decided to incorporate a corporation under the Canada Business Corporations Act to carry it on. She will be the sole shareholder and director. If you were a client of the health club, which of the following would be a legitimate concern based on the change in the legal status of the health club business?

Question

Quizplus · Accepted Answer

Incorporation creates a separate legal entity for the business, which means that the business's debts and liabilities are not the personal debts and liabilities of the owner. This means that if you have a claim against the business, you will only be able to collect from the business's assets, not from Rachi's personal assets.

Rachi Is a Wealthy Businessperson with Substantial Personal Assets