Answer the following Questions?

1. Why are sole proprietors personally liable for the debts of their business?

2. Did Barr act ethically in denying responsibility for the Stone Scone's debts?

CASE 14.1 STATE COURT CASE Sole Proprietorship Bank of America, N.A. v. Barr 9 A.3d 816, 2010 Me. Lexis 130 (2010) Supreme Judicial Court of Maine "An individual doing business as a sole proprietor, Issue even when business is done under a different name, Is Barr, the sole owner of The Stone Scone, personally remains personally liable for all of the obligations of liable for the unpaid debt? the sole proprietorship." Language of the Court -Alexander, Judge The trial record contains sufficient evidence that Barr is personally liable for the debt owed Facts to Bank of America. The evidence demonstrates Constance Barr was the sole owner of The Stone that, at the time Barr acted on The Stone Scone's Scone, a business operated as a sole proprietorship. behalf to procure the small business line of credit, Based on documents signed by Barr on behalf of she was the owner of The Stone Scone and the The Stone Scone, Fleet Bank approved a $100,000 sole proprietor of that business. An individual unsecured small business line of credit for The doing business as a sole proprietor, even when Stone Scone. Fleet Bank sent a letter addressed to Barr and The Stone Scone, which stated, "Dear business is done under a different name, remains Constance H Barr: Congratulations! Your com- personally liable for all of the obligations of the pany has been approved for a $100000 Small Busi- sole proprietorship. As the sole proprietor of ness Credit Express Line of Credit." The bank sent The Stone Scone when that sole proprietorship account statements addressed to both The Stone entered into the agreement for a line of credit with Scone and Barr. For four years, Fleet Bank provided Fleet Bank, Barr became personally liable for the funds to The Stone Scone. After that time, however, debts incurred on that line of credit account. The Stone Scone did not make any further pay- ments on the loan, leaving $91,444 unpaid princi- Decision pal. Bank of America, N.A., which had acquired Fleet The supreme judicial court affirmed the trial court's Bank, sued The Stone Scone and Barr to recover the judgment that held Barr personally liable, as the sole unpaid principal and interest. Barr stipulated to a proprietor of The Stone Scone, for the sole propri- judgment against The Stone Scone, which she had etorship's unpaid debt owed to Bank of America. converted to a limited liability company, but denied personal responsibility for the unpaid debt. The trial Critical Legal Thinking Questions court found Barr personally liable for the debt. Barr Why are sole proprietors personally liable for the debts of appealed. their business? Did Barr act ethically in denying responsi- bility for The Stone Scone's debts