12 ms·

Thank you for the resource, especially for someone who launched their first LLC almost a year ago. > Forming a corporation helps protect the founders from pers

Thank you for the resource, especially for someone who launched their first LLC almost a year ago. > Forming a corporation helps protect the founders from personal liability. If the corporation is sued, the assets of its founders are more likely to be protected. Hmm... I guess this means that by forming a corporation, there's no guarantee that a founder's assets will be protected.

searchableguy 5y ago
LLC veil can be pierced if they are the sole person responsible for the business. It is different case if there are multiple shareholders and employees though. All depends on the country.
- invokestatic 5y ago
  Depends on the /state/ as well.
cedricd 5y ago
It can happen, but it's rare. Read up on 'piercing the corporate veil' if you're interested. It generally happens in cases of fraud, gross misconduct, criminal behavior, etc. In a more common scenario of a company going bankrupt through the normal course of business the founder's assets will be protected.
- hef19898 5y ago
  One notable exception: bank loans, especially for new companies banks tend to ask for private guarantees to back up those loans.
  - avianlyric 5y ago
    That’s not really an exception. The banks aren’t piecing the corporate veil there, they’re simply asking a natural human to be party to the loan contract, as a condition of leading. Anyone can do that. You’re just forming a contract between both a corporate entity and a natural person, with clauses requiring the natural person to cover the obligations the corporate entity, if the corporation fails to fulfil its obligations. The natural person in this cases doesn’t have be a founder, or company owner. It could even be another larger corporate entity that’s less likely to vanish overnight. But none of this changes the protections a corporation gives its owners, it’s just that the owner are choosing to sign contracts that make them personally liable for failures of the corporation.
    - hef19898 5y ago
      You are absolutely right. Because a personally backed loan can be backed by anyone and is limiting the liability to whatever the loan guarantee was. Not additional liability for whatever liabilities come from the company. All that depends on the legal entity form used, which is especially in Europe quite interesting.

searchableguy 5y ago

LLC veil can be pierced if they are the sole person responsible for the business. It is different case if there are multiple shareholders and employees though. All depends on the country.

invokestatic 5y ago
Depends on the /state/ as well.

cedricd 5y ago

It can happen, but it's rare. Read up on 'piercing the corporate veil' if you're interested. It generally happens in cases of fraud, gross misconduct, criminal behavior, etc. In a more common scenario of a company going bankrupt through the normal course of business the founder's assets will be protected.

hef19898 5y ago
One notable exception: bank loans, especially for new companies banks tend to ask for private guarantees to back up those loans.
- avianlyric 5y ago
  That’s not really an exception. The banks aren’t piecing the corporate veil there, they’re simply asking a natural human to be party to the loan contract, as a condition of leading. Anyone can do that. You’re just forming a contract between both a corporate entity and a natural person, with clauses requiring the natural person to cover the obligations the corporate entity, if the corporation fails to fulfil its obligations. The natural person in this cases doesn’t have be a founder, or company owner. It could even be another larger corporate entity that’s less likely to vanish overnight. But none of this changes the protections a corporation gives its owners, it’s just that the owner are choosing to sign contracts that make them personally liable for failures of the corporation.
  - hef19898 5y ago
    You are absolutely right. Because a personally backed loan can be backed by anyone and is limiting the liability to whatever the loan guarantee was. Not additional liability for whatever liabilities come from the company. All that depends on the legal entity form used, which is especially in Europe quite interesting.