Question

Marshall Officer is a stockholder in Endrun Investments, which is organized as a C Corporation. Endrun recently lost a major court decision and will probably be forced into bankruptcy. In fact, the damages awarded are so great that, even if all of its assets are sold and the proceeds are used to pay its debts, Endrun is likely to still owe money to its creditors.
If Endrun does go bankrupt, Marshall and the other stockholders will:

A) be personally responsible for all remaining debts.
B) lose their investment but nothing else.
C) be entitled to full reimbursement of any investment losses.
D) automatically qualify for federal reimbursement for any losses suffered by the firm.

Answer 1

Answer:

B) lose their investment but nothing else.

Explanation:

When a company becomes bankrupt and its assets were unable to settle it's obligations as is the case of Endrum Investments, the shareholders lose the value they had in their shares.

A C corporation is one in which the business is a seperate entity from the shareholders. The shareholders are not liable for any action taken against the company.

In this instance since the shares are the assets of the company, they will be liquidated to settle the damages awarded in court. Shareholders are not liable for the extra debt owed by the business.