Joe Smith owns a book store as the sole proprietor. He is also a partner in a hotel, which borrowed $100,000 from the bank. Which of the following statements is true?

Question

Quizplus · Accepted Answer

As a partner in the hotel, Joe Smith is personally liable for the debt borrowed from the bank. Therefore, the bank can look to his personal assets and also the assets of any business he owns, including the book store, to pay off the debt. The book store is not a separate legal entity from Joe Smith as a sole proprietor, so its assets can be used to pay off the debt. Option A is incorrect because the book store's assets can be used to pay off the debt even if it is not operated in conjunction with the hotel. Option B is incorrect because the bank can go after any of Joe Smith's assets, regardless of whether or not he negotiated the loan personally. Option C is incorrect because Joe Smith, as a partner, is personally liable for the debt and can lose more than just his investment in the hotel. Option D is incorrect because a sole proprietorship does not provide limited liability, and the book store's assets can be used to pay off the debt.

Joe Smith Owns a Book Store as the Sole Proprietor