John Henry has a small housecleaning business that currently is a sole proprietorship. The

business has nine employees, annual sales of $480,000, total liabilities of $90,000, and total

assets of $263,000. Including the business, Henry has a personal net worth of $467,000 and

nonbusiness liabilities of $42,000, represented by a mortgage on his home. He would like

to give one of his employees, Tori Kobayashi, an equity interest in the business. Henry is

considering either the partnership form or the corporate form, where Kobayashi would be

given some stock. Kobayashi has a personal net worth of $36,000.

a. What is the extent of Henrys exposure under the sole proprietorship in the case of a

large lawsuit (say, $600,000)?

b. What is his exposure under a partnership form? Do the partners share the risk?

c. What is his exposure under the corporate form?