Question

QUESTION 1/11

A limited liability corporation in which you are a
shareholder has just gone bankrupt. The company has a
large debt, that is its liabilities are far in excess of its
assets. Hence, you will be called on to pay:
1 point
A proportion of the total debt, which is decided at
the discretion of the bankruptcy judge.
An amount that could, at most, equal what you
originally paid for the shares of common stock in the
corporation.
A proportional share of all creditor claims based on
the number of common shares that you own.
Nothing.

Answer 1

You will have to pay nothing as your liability is limited to the amount you have invested in the company and it is protected as well . So you're not responsible for company's debt beyond your investment in case of bankrupt.

Answer 2

In a limited liability corporation, a shareholder's responsibility for company debts in the event of bankruptcy is limited to their investment in the company. Hence, shareholders will be called on to pay nothing beyond the initial cost of their stock shares.

Step-by-step explanation:

If a limited liability corporation (LLC) in which you are a shareholder has declared bankruptcy and the liabilities exceed assets, your financial responsibility is generally limited. Shareholders are not personally liable for the company's debts in a corporation; instead, their liability is limited to the amount they have invested in the company. Therefore, in the event of corporate bankruptcy, as a shareholder, you can lose your investment in the stock, but you will not be responsible for the company's debts.

In this case, you will be called on to pay nothing beyond what you originally paid for the shares of common stock in the corporation. This is in line with one of the advantages of being a shareholder in a corporation, which provides limited liability protection.