
Can I Set Up An LLC To Avoid Personal Liability In A Lawsuit? - brlewis
http://www.litigationandtrial.com/2009/05/articles/the-law/for-people/can-i-set-up-an-llc-to-avoid-personal-liability-in-a-lawsuit/
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MaxwellKennerly
I'm the author; thanks for reading and let me address it "go[ing] a bit far."

In the context of Hacker News readers (presumably startups looking for funding
and with employees) there are many good reasons for setting up an LLC,
including limiting liability if one of those employees gets sued, and limited
contractual liability. However, the point I was getting at is that the LLC
doesn't totally shield you from liability, a misconception that has brought a
lot of trouble to people who played fast and loose with their conduct and
ended up staring down the barrel of potential personal liability.

The core point is: don't try to "dodge" liability. Instead, take steps to
reduce the likelihood of causing harm and get a good insurance policy.

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mattmaroon
That article was very useful. I wish we had more attorneys writing such
entries for the rest of us. There are a striking number of legal
misperceptions out there among businesspeople.

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micks56
Do you have any specific topics in mind?

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bwd
How about asset protection strategies?

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micks56
Are you looking to protect business versus personal assets, or protecting
assets via risk management, or other?

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bwd
Mostly looking to protect personal assets.

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alain94040
Hopefully, liability never becomes an issue in your startup, but hope is not
an acceptable plan :-)

So it's good to debunk the myth of the fake LLC. I just think the article goes
a bit far (but the author is a lawyer and I'm not).

Either way, it matches my experience: in the US, you can get sued pretty much
no matter what steps you have taken _not_ to get sued...

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dkokelley
Well, from what I understand, anyone can sue anyone for any reason. It's
whether or not they will win, and more importantly _what_ they will win that
people go to great lengths to protect against.

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FooBarWidget
If their goal is to bankrupt you, then doesn't starting a lawsuit fulfill that
goal, regardless of whether they win?

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irinotecan
There are "anti-SLAPP" laws to deal with people filing frivolous lawsuits
whose sole purpose is to bankrupt or silence you (or your business)

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dryicerx
Any thoughts on getting sued regarding IP Infringement as a LLC, how does the
liability trickle down to the people behind the LLC.

For example company X sues a LLC stating that they have violated a patent for
example?

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MaxwellKennerly
If by "people behind the LLC," you mean the investors, then, yes, their
liability is _typically_ limited.

I write "typically" because investors can be liable if either (1) they
participated in the infringement or (2) a court decides to "pierce the
corporate veil," which is rare, but can happen if an investor abuses an LLC
(undercapitalizing it, disregarding corporate forms, etc) for the purpose of
avoiding liability.

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newsio
My umbrella insurance policy includes coverage for defamation-related suits,
and it seems to be standard for the insurance company's customers (i.e., I did
not have to request it). It's not like I am going out of my way to provoke
such suits, but it's nice to have.

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torr
Setting up and keeping up an LLC is a bit of a pain in the neck. Also working
out how to pay yourself, keeping accounts separate, and so on takes extra
time.

One benefit of an LLC might be a somewhat more professional image (for some
customers anyway). Also, my guess is that corporate customers may not want to
do business with you unless you're an LLC (though I wouldn't know for sure as
I have no corporate customers).

Anyone here go from having your own LLC to dissolving it and going sole
proprietership?

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bonsaitree
"A pain in the neck"

You've got to be kidding.

1\. Trivial law work is required. 2\. Annual total business license fees range
from ($20-$1,000) depending on location 3\. Trivial bank account setup

All of this can be accomplished literally in the span of a few hours. I would
argue the biggest maintenance costs are related to tax filings and accounting,
but they're more than offset by all the available expense write-offs.

It's really a no-brainer decision with today's streamlined systems and
litigious society. Additionally, having an LLC operating agreement (even a
generic one) in place, usually makes converting to a C-corp (to be available
for VC financing) much easier.

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blurry
Not so in New York. You have your UBT (over $3,000 per year), your publication
requirements (over $1,500 per registration), and more. Considering that
generally your clients cannot sue you for more than the contract was worth in
the first place (excepting rare cases of willful negligence etc.) it is _far_
from a no-brainer.

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bonsaitree
Willful negligence indeed. That's why it's a good idea to carry E&O insurance
in most states--despite the costs.

Nah, the tax write-offs alone make those costs more than manageable.

