Question

Harry and Meghan have considered starting their own business but are concerned about the possibility of losing even their personal assets if the business fails. One way for BOTH Harry and Meghan to avoid this liability risk would be to :

A.
divorce as soon as possible and establish two sole proprietorships

B.
Organize a limited partnership with Harry as the general partner

C.
set up offshore accounts

D.
form a corporation

Answer 1

Answer:

The correct option is D,form a corporation

Explanation:

The rationale for my choice of answer is that limited liability applies to a corporation which is found in other types of businesses.

Limited liability is a concept which implies that the liability of shareholders in a limited liability company is limited to the amount contributed to the business by a way of shares held in the company.

When a company runs into debt,the shareholders would not be required to make up such debts from their private pockets,hence Harry and Meghan personal effects are secure.

Answer 2

The way for Harry and Meghan to avoid liability risk is to form a corporation

Typically, a limited liability applies to a corporation which means that the owner liability is limited to the amount he owns in the business.

Limited liability implies that liability of shareholders is limited to the amount contributed to the business by a way of shares held in the company.

So, when company runs into debt, the shareholders would not be required to make up such debts from their private pockets,therefore, the investment of Harry and Meghan are secure.

Hence, the only way for Harry and Meghan to avoid liability risk is to form a corporation

Therefore, the Option D is correct.

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