4 ms·
How does he avoid it being a Sole Proprietorship and being on the hook personally for any lawsuits against it?
by larrik 7y ago
How does he avoid it being a Sole Proprietorship and being on the hook personally for any lawsuits against it?
- nostrademons 7y agoYou can have a one-person corporation where the founder is the sole shareholder, officer, and employee and still be protected from legal liability. A very large proportion of LLCs are in exactly this category, as well as a decent number of S- and C-corps. You just have to file the appropriate articles of incorporation, continue paying your taxes, and make sure that company business is done in the company name out of the company bank accounts while personal business is done in your name out of your personal bank account.
- henryfjordan 7y agoDon't forget throwing yourself a little "shareholders meeting" every year!
- nostrademons 7y agoYup, and re-electing yourself president of the board of directors.
- koolba 7y agoIts common to do that right before the company funded annual holiday party.
- Igelau 7y agoWhere you get recklessly drunk and wake up next to the CEO's spouse!
- 1123581321 7y agoIt’s still a separate legal entity. Sole proprietorship means there is no corporation, just a person doing business with their own assets and getting paid directly.
- bdcravens 7y agoYou can't just setup a corp and get immunity - that's a popular myth. There's many ways you can "pierce the corporate veil". However, as long as the company has officers, has all their paperwork in order, etc, it's a legit corp (regardless of how many investors there are)
- henryfjordan 7y agoYou absolutely can just set up a corp and get immunity. Piercing the corporate veil is hard and requires hard proof that corp is a sham. The courts even respect obvious abuse of the system so long as the paperwork is done correctly (see https://en.wikipedia.org/wiki/Walkovszky_v._Carlton https://en.wikipedia.org/wiki/Walkovszky_v._Carlton). All you have to do is follow the rules and your corp is valid.
- 1123581321 7y agoI largely agree with your post, but I was only clarifying how sole ownership of a corporation is different than sole proprietorship.
- pjdemers 7y agoLLC's only need one owner. The liability protection is still there. The drawback to LLCs is their income is the owner's income. He must pay taxes on the profit every year, at his personal marginal rate. What's left after taxes is his, not the company's. He can avoid taxes by investing back into the business, but the company can't have retained earnings. If the company runs short of cash, he must loan the money back to the company (or find someone else to borrow from).