3 ms·

And you can be sued by a nut on day one, for any reason. I've read that if an LLC has only one member, judges are free to ignore the "limited liability" part. I

by genwin 14y ago

And you can be sued by a nut on day one, for any reason. I've read that if an LLC has only one member, judges are free to ignore the "limited liability" part. It might be necessary to incorporate.

tptacek 14y ago
I don't think this is true, at least in the broad sense you've suggested here. There are lawyers on HN that will correct me when I say this: There are, in many states, special-case rules for "single member" LLCs. There are also special rules in places for single-shareholder corporations. Those special-case rules largely impact the manner in which equity in the company is handled when resolving debts. Meanwhile: there is a very widespread misunderstanding of how liability protection in corporations of all sorts work. The protection you get from a Corp/LLC is from contract liability: third parties cannot attach themselves to the assets of company owners to settle debts. But liability shields afford no protection against torts, including contracts entered in bad faith. If you own a company and the company enters into fraudulent contracts, you can still lose your house in the ensuing legal drama.
- wooster 14y ago
  Great response. I'd add that it's worth Googling for "piercing corporate veil LLC", as well.
  - tptacek 14y ago
    This search will also quickly teach you not to use your company's bank account to buy your groceries or pay your rent; mixing finances is a no-no. The general rule of thumb seems to be: courts want to be sure that the corporation you're operating is bona fide; that is, they want to know that you're not simply using a corporate structure to conduct shady personal business. This doesn't have much of anything to do with whether you're a SMLLC or not (except to the extent that having multiple members makes it harder to use the LLC as a personal piggy bank).

3 ms·

And you can be sued by a nut on day one, for any reason. I've read that if an LLC has only one member, judges are free to ignore the "limited liability" part. I

by genwin 14y ago

And you can be sued by a nut on day one, for any reason. I've read that if an LLC has only one member, judges are free to ignore the "limited liability" part. It might be necessary to incorporate.

tptacek 14y ago
I don't think this is true, at least in the broad sense you've suggested here. There are lawyers on HN that will correct me when I say this: There are, in many states, special-case rules for "single member" LLCs. There are also special rules in places for single-shareholder corporations. Those special-case rules largely impact the manner in which equity in the company is handled when resolving debts. Meanwhile: there is a very widespread misunderstanding of how liability protection in corporations of all sorts work. The protection you get from a Corp/LLC is from contract liability: third parties cannot attach themselves to the assets of company owners to settle debts. But liability shields afford no protection against torts, including contracts entered in bad faith. If you own a company and the company enters into fraudulent contracts, you can still lose your house in the ensuing legal drama.
- wooster 14y ago
  Great response. I'd add that it's worth Googling for "piercing corporate veil LLC", as well.
  - tptacek 14y ago
    This search will also quickly teach you not to use your company's bank account to buy your groceries or pay your rent; mixing finances is a no-no. The general rule of thumb seems to be: courts want to be sure that the corporation you're operating is bona fide; that is, they want to know that you're not simply using a corporate structure to conduct shady personal business. This doesn't have much of anything to do with whether you're a SMLLC or not (except to the extent that having multiple members makes it harder to use the LLC as a personal piggy bank).