Which owner will NOT have their personal assets protected from business debts?

Which owner will NOT have their personal assets protected from business debts?

• A. An owner of stock in a regular C corporation
• B. An owner of stock in an S corporation
• C. An individual owner of a limited partnership interest
• D. An individual owner of a general partnership interest

Answer: (D)

The key idea is how liability protection varies by business structure. Stockholders in regular C corporations and in S corporations generally enjoy limited liability, meaning their personal assets aren’t at risk for the company’s debts beyond their investment. An individual who owns a limited partnership interest has protection for the limited partner role—the personal liability is limited to their investment, though general partners in the same partnership do not share that protection. In a general partnership, there is no shield: each partner has unlimited personal liability for the debts and obligations of the partnership, so personal assets can be pursued to satisfy those debts. Therefore, the owner who will not have personal assets protected from business debts is the individual who holds an interest in a general partnership.

The key idea is how liability protection varies by business structure. Stockholders in regular C corporations and in S corporations generally enjoy limited liability, meaning their personal assets aren’t at risk for the company’s debts beyond their investment. An individual who owns a limited partnership interest has protection for the limited partner role—the personal liability is limited to their investment, though general partners in the same partnership do not share that protection. In a general partnership, there is no shield: each partner has unlimited personal liability for the debts and obligations of the partnership, so personal assets can be pursued to satisfy those debts.

Therefore, the owner who will not have personal assets protected from business debts is the individual who holds an interest in a general partnership.