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If the failure of a business means personal financial (and perhaps criminal, as history shows) ruin then very few people would start businesses. Limited Liabili

If the failure of a business means personal financial (and perhaps criminal, as history shows) ruin then very few people would start businesses. Limited Liability for both the managers and shareholders is absolutely critical, unless you want everything operated by the same people who run the DMV.

rdtwo 7y ago
Only large companies can be truly be limited liability enterprises. Small business have to give personal guarantees for everything and you can bet that small business owners will be prosecuted to the fullest extent of the law if they screw up llc or not. It’s only the big players that are really allowed to benefit from the corporate veil.
- snagglegaggle 7y ago
  It's possible to create a small LLC but there's a minefield of actions that could let a judge rule the LLC to be a "legal fiction" and to pop the bubble of limited liability. Such rulings are usually applied to small LLCs, and as far as I know to enforce debt. Why this bubble can not be popped in seemingly any other case, especially when criminal acts have been committed, is what GP is complaining about, and was the expected outcome by critics of limited corporations when they were introduced.
pjc50 7y ago
Limited liability is what allows "managers" and "shareholders" to be separated in the first place, and thereby allows the raising of huge amounts of capital. If liability is unlimited, would you really hand over unlimited liability to managers without extremely close oversight? No. So shareholders would have to directly run the business. Worse, would the shareholders hand over unlimited liability to a voting process in which they might lose to other shareholders? Conversely, it's both unfair and pointless to make the mere managers, who are staff and not contributors of capital, liable for the business operations. There are exceptions to this but they tend to be small to medium low-capital businesses. Accountancy and law firms often operate as partnerships, for example. No, the LLC is a primitive of operation on which the economy is built. It's not going anywhere. But if people start using it as an excuse to dump externalities on the public, there is going to be a policy response imposing some kind of "corporate social responsibility". But none of that is relevant here. This is the good old fashioned over-investment by the over-wealthy in schemes they thought would pay back by monopolizing future profits. > If the product is something else and cannot produce software gross margins then it needs to be valued like other similar businesses with similar margins, but maybe at some premium to recognize the leverage it can get through software.
- gnopgnip 7y ago
  Most law firms will be limited liability partnerships these days, and will have professional liability insurance.

rdtwo 7y ago

Only large companies can be truly be limited liability enterprises. Small business have to give personal guarantees for everything and you can bet that small business owners will be prosecuted to the fullest extent of the law if they screw up llc or not. It’s only the big players that are really allowed to benefit from the corporate veil.

snagglegaggle 7y ago
It's possible to create a small LLC but there's a minefield of actions that could let a judge rule the LLC to be a "legal fiction" and to pop the bubble of limited liability. Such rulings are usually applied to small LLCs, and as far as I know to enforce debt. Why this bubble can not be popped in seemingly any other case, especially when criminal acts have been committed, is what GP is complaining about, and was the expected outcome by critics of limited corporations when they were introduced.

pjc50 7y ago

Limited liability is what allows "managers" and "shareholders" to be separated in the first place, and thereby allows the raising of huge amounts of capital. If liability is unlimited, would you really hand over unlimited liability to managers without extremely close oversight? No. So shareholders would have to directly run the business. Worse, would the shareholders hand over unlimited liability to a voting process in which they might lose to other shareholders? Conversely, it's both unfair and pointless to make the mere managers, who are staff and not contributors of capital, liable for the business operations. There are exceptions to this but they tend to be small to medium low-capital businesses. Accountancy and law firms often operate as partnerships, for example. No, the LLC is a primitive of operation on which the economy is built. It's not going anywhere. But if people start using it as an excuse to dump externalities on the public, there is going to be a policy response imposing some kind of "corporate social responsibility". But none of that is relevant here. This is the good old fashioned over-investment by the over-wealthy in schemes they thought would pay back by monopolizing future profits. > If the product is something else and cannot produce software gross margins then it needs to be valued like other similar businesses with similar margins, but maybe at some premium to recognize the leverage it can get through software.

gnopgnip 7y ago
Most law firms will be limited liability partnerships these days, and will have professional liability insurance.