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

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Incorporating the health club as a separate legal entity means that the business will have limited liability, which means that it will only be liable for its own debts and obligations. As the sole shareholder and director, Rachi will not be personally responsible for any claims against the business. This may increase the risk that any claims made by clients will not be paid. Therefore, clients may be legitimate concerns about the possibility of not receiving compensation for any complaints or issues they may have with the health club. The other options are not likely to be affected by the change in legal status, as Rachi is the sole shareholder and director and can control management personnel, cleanliness and service quality standards, and pricing. Clients can also still complain to Rachi about any problems they have with the operation of the health club.

Rachi Is a Wealthy Business Person with Substantial Personal Assets