Rachi is a wealthy business person 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

The change in legal status from a sole proprietorship to a corporation means that the health club is now a separate legal entity, which may increase the risk that any claims against the business may not be paid. As a sole proprietorship, Rachi would have been personally liable for any claims against the business, but as a corporation, the liability is limited to the assets of the corporation. Therefore, there is a legitimate concern that any claims made against the health club may not be paid.

Rachi Is a Wealthy Business Person with Substantial Personal Assets