Question

One major advantage of corporate ownership is limited liability of shareholders. Let's say that Emma is the primary shareholder of a family based corporation that owns five laundromats in town. Emma's company needs to borrow $350,000 from the bank to expand its business. As President, she signs a promissory note with the bank on behalf of the corporation. The banker also asks that she sign another document in which she is personally liable for the loan in the event the corporation cannot repay it. The three other shareholders, Tom, James and Linda, do not sign the paper to be personally liable. If the company goes bankrupt and the bank loan is not paid, is Emma personally liable to the bank for the balance on the note or is she not liable since the loan was given to the corporation?

Answer 1

Corporate ownership is one of three general classifications of legitimate responsibility for the business, the other two being sole ownership and association. In ownership, the proprietor is by and by at risk for their business' obligations and misfortunes, there is no qualification made among individual and business salary, and the business ends upon the demise of the proprietor (except if some particular plan is made for somebody to acquire the business). An organization is simply joint possession, and subsequently, as far as to close to home obligation, it is comparable all around to a corporate owner. The two classes of business possession are straightforward game plans that can be gone into and disintegrated effectively, without even a composed agreement, here and there just by shaking hands.

. While an individual may claim all the portions of a partnership, the individual isn't by and by answerable for it. That is on the grounds that a partnership is, carefully characterized, a legal entity that is "eternal" (doesn't end up on the proprietor's demise), which can go into and break up contracts, acquire obligations, sue or be sued, own property and sell it, as an individual may do.

The corporate structure props a business up when the proprietors leave, resign or pass on. The unending presence of organizations permits the present proprietors to move their offers; At the point when a sole owner bites the dust, the business closes.At the point when an organization goes bankrupt, it auctions its outstanding resources for pay off however much of its obligations as could reasonably be expected, not all obligations are equivalent in need. The bankrupt organization must result in its loan bosses and investors as indicated by a request set by government laws.

BankruptcyCosts

The main gathering of obligations that should be paid is the costs that surface. This gathering incorporates the law office the bookkeeper who handles the organization's last bookkeeping postings, the sale administration that auctions the organization's property and whatever other assistance that was bought to help wind down the organization's undertakings.

Secured Creditors

After the organization handles its bankruptcy costs, it begins taking care of its business lenders. The organization first takes care of its made sure about leasers. Made sure about leasers gave credits dependent on physical bits of property. These are obligations like the home loan on organization structures, rents on organization vehicles and advances for unpaid bits of gear. Made sure about loan bosses recover their cash first, for the most part by reclaiming their property. On the off chance that this isn't sufficient to take care of the obligation, the made sure about leasers get first dibs on any residual organization cash.