Jasmin, Shou-Yi, and Vanessa form an LLC, and each contributes $25,000 in capital. The LLC operates for a period of time, during which it borrows money from banks and purchases goods on credit from suppliers. After some time, the LLC experiences financial difficulties and goes out of business. If the LLC fails with $500,000 in debts, which of the following is an accurate statement regarding the liability of Jasmin, Shou-Yi, and Vanessa?
A. Each will lose her capital contribution of $25,000, but will not be personally liable for the rest of the unpaid debts of the LLC.
B. Each will lose her capital contribution of $25,000, and will be personally liable for the rest of the unpaid debts of the LLC.
C. Each will not be personally liable for the $500,000 in debts, and will be reimbursed for her $25,000 capital contribution.
D. Each will not be personally liable for the $500,000 in debts, and a constructive trust for the entire $75,000 in capital contributions will be imposed so that Jasmin, Shou-Yi and Vanessa can form a new business venture.
Answer: A
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