Question

if you own stock in a corporation that goes bankrupt, you ______.

have unlimited liability
have the same liability as you would had you invested the same amount in a partnership or sole proprietorship
are personally liable for the corporations debt
only stand to lose what you paid to buy the stock

Explanation:

Analyze corporate liability structure

Corporate shareholders benefit from limited liability, meaning their personal assets are protected from the corporation's creditors.

Evaluate the options

• "have unlimited liability": Incorrect, as corporations offer limited liability.
• "have the same liability as you would had you invested the same amount in a partnership or sole proprietorship": Incorrect, as partners and sole proprietors generally face unlimited personal liability.
• "are personally liable for the corporation's debt": Incorrect, because personal assets cannot be seized to pay corporate debts.
• "only stand to lose what you paid to buy the stock": Correct, as a shareholder's maximum potential loss is limited to their initial investment.

Answer:

• have unlimited liability
• have the same liability as you would had you invested the same amount in a partnership or sole proprietorship
• are personally liable for the corporation's debt
• only stand to lose what you paid to buy the stock (Correct answer)