Liability comparisons

NerissaSmith has invested $47,000 in Northeast Productions Company. The firm has recently declared bankruptcy and has $108,000 in unpaid debts. Explain the nature of Nerissa's personal liability , if any, in each of the following situations. a. NortheastProductions Company is a sole proprietorship owned by Ms.Smith. b. NortheastProductions Company is a 50-50 general partnership of NerissaSmith and RogerBrown. c. NortheastProductions Company is a limited partnership where NerissaSmith is a limited partner. d. NortheastProductions Company is a corporation.

If NortheastProductions Company is a 50-50 partnership of NerissaSmith and RogerBrown,:

(Select the best answer below.)

A. Ms. Smith has limited liability, which is $54,000, or half of the $108,000 in unpaid debts.

B. Ms. Smith has unlimited liability, which means creditors can only claim against the $47,000 she invested.

C. Ms. Smith has limited liability, which guarantees that she cannot lose more than the $47,000 she invested.

D. Ms. Smith has lost her $47,000 investment and shares unlimited liability with her partner. Initially, Ms. Smith is liable for $54,000 (50% of total unpaid debts). But if her partner cannot cover half the debt, Ms. Smith is liable for the full amount.