Question

1. Assume the football team is set up as a C corporation and that Lenny, Sarah, and Sam are the shareholders. The team is sued for negligence because an individual who turned to see the quarterback running naked crashed her car. Which of the following is true?
The corporation may have liability, but not the individual owners.

The individual owners may have liability, but not the corporation itself.

The corporation may have liability as well as the owners individually, but the owners' individual liability is limited to twice their investment in the company.

Answer 1

Answer:

The corporation may have liability, but not the individual owners.

Explanation:

A c-corporation have a limited liability which means that the liability of the company cannot be extended to shareholders. It is only limited to the amount invested by the shareholders.

Therefore, the shareholders of the c - corporation won't be personally affected by the law suit.

A c- corporation is a form of corporation where the shareholders are taxed separately. In addition to taxing shareholder, corporate income is also taxed which leads to a double taxation.