25. bennis is a partner in the Smile Clinic. Dennis applies for a loan Bank alle

Question

25. bennis is a partner in the Smile Clinic. Dennis applies for a loan Bank allegedly on the firm's behalf but without the express authorization of t other partners. If Dennis defaults on the loan, liability for its unpaid amount will be imposed on a. Dennis only b. the clinic. c. Dennis and the clinic. d. Dennis, the other dentists, and the clinic. 26. Ann, Bob and Carl form ABC LLC, a landscape design business. Sadly, the LLC is sued because Bob accidently planted the very poisonous Pottey Plant at the Gate's house and all the Gates children were hospitalized. When the Gates sued a. Only Bob is personally liable. b. Ann, Bob, Carl and the ABC LLC are jointly and severally liable. c. Ann, Bob, and Carl may be liable only to the extent of their capital investment. . No one is liable because the LLC is a separate legal entity. 7. StartUp Investors, LLC, is a limited liability company without a written operati greement. Among the members, a dispute arises concerning the division of profit nder most LLC statutes, the profits will be distributed according to the members' proportionate shares of ownership in t

Explanation / Answer

LLC refers to Limited Liability Company which is a combination of a company and a partnership firm or sole proprietorship. The main feature is that it is like a partnership firm having few members but the Liability of all the members is limited to the extent of their capital contribution in the company.

Correct answer is (c.) i.e. Ann,Bob and Carl may be liable only to the extent of their capital investment. It is because Ann,Bob and Carl forms ABC LLC, and an LLC's members in case of any dispute or charge has their liability limited to the extent of the amount that they have invested in the business. Thus, as they are sued by the Gates, all the members are responsible to the extent of their capital contribution.

Option (a) is incorrect because any member cannot be personally liable for any charge which is against the company. All have to be jointly and limited liable.

Option (b) is incorrect as all the three members are jointly responsible but not severally. They are jointly and limited liable.

Option (d) is incorrect because LLC is a separate legal entity but the liability arises for the members Only.

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