Question

The business assets of a firm are worth Rs. 70,000 but the debts remain unpaid are worth Rs. 1,00,000. What course of action can the creditors take in the following cases?
(a) The organisation in sole proprietorship firm.
(b) The organisation in partnership firm with A and B, two partners sharing profit equally.

Answer 1

(a) The creditors may claim from the personal personal property of the proprietor as he has limited liability.
(b) A and B are jointly and individually liable to pay back the debts. Both are responsible to pay back the debt in the profit sharing ratio and if one of the partners becomes insolvent then the other is liable to pay back the full debt.