Question

Adrian and Fran operate their computer tech support company "Best Techs," as an S corporation, file the appropriate incorporation and registration paperwork with the Secretary of State's office, hold shareholders' meetings to elect a board of directors, hold board of directors' meetings to appoint corporate officers, and maintain all corporate documents and other formalities. Bruno, one of their customers, claims that Hemi, Best Techs' employee negligently installed anti-virus software on his business' computers, that all of his office computers were infected with a serious computer virus as a result, and that the damage cost him thousands of dollars to fix. If Bruno sues Best Techs and successfully proves negligence:
A. Adrian and Fran will have limited liability, meaning they might lose their investments in Best Techs but will not lose their personal assets.
B. Adrian and Fran will be personally liable for the debt, meaning they may have to pay the debt from their personal assets.
C. Either Adrian or Fran will have to be personally liable, since at least one of the partners must be a general partner.
D. Only the partners who actively participated in the management of the company on a day-to-day basis will be personally liable.

Answer 1

Answer:

Option A. Adrian and Fran will have limited liability, meaning they might lose their investments in Best Techs but will not lose their personal assets.

Explanation:

The reason is that the organization which is a limited company is responsible for the employee's negligence and as a result the compensation for the negligence would be paid by the company then the Adrian and Fran's investment in that company is affected by the compensation that the company would pay, not their personal assets. The shareholders are not liable for the negligence of the employee but the company is. Hence the maximum loss to the shareholders  Adrian and Fran would be the investment in the company and assets other than this investment will have no impact of this compensation.

So the option A is the correct option.