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Homework answers / question archive / Christie had a falling out with Frank and Matt and decided to open up her own shop - Christie's GlassWorks, selling windows on a retail basis
Christie had a falling out with Frank and Matt and decided to open up her own shop - Christie's GlassWorks, selling windows on a retail basis. She decided to set up a sole proprietorship. At her grand opening, Eric was in the store and a window display fell over and hit him on the head. Eric sued Christie's GlassWorks. Which of the following is true about Christie's potential liability?
a. Christie cannot be held personally responsible; Eric's insurance must pay for the claim,
b. Christie can be held personally liable to Eric because she is the owner,
c. Christie has no potential liability to the customer,
d. Christie can only be liable to the amount she initially invested in the business.
Answer choice: b. Christie can be held personally liable to Eric because she is the owner.
Explanation:
Since Christie's business is considered a sole proprietorship then she can be held personally liable for any lawsuits that occur at her place of business. A sole proprietorship does not have any personally liability protection like a limited liability company does. Christie could be sued for her business assets as well as her personal assets. This is a huge disadvantage of this type of business. A sole proprietorship is easy to form but has unlimited legal liability.
