

Ask HN: Is my corporation protected? - Anon123123

Honest question:<p>Suppose someone has created a product of value and would like to incorporate and sell it.  How should he approach the incorporation process given he has personal debt and poor credit?<p>1.  What type of corporation should he consider?<p>2.  Can collections sue (or otherwise come after) his corporation?  (does this depend on collector?  (ie AIG vs. IRS))<p>3.  Worst case, can he partner with me (or someone with exemplary credit) to protect the corporation?
======
brk
include ianal.h

Personal credit and cash issues should have no bearing on an LLC, S corp or C
corp. His personal debt and poor credit would probably work against him if he
plans on having the corporation take out some kind of loan or line of credit
that he would have personally guaranteed (if he had decent credit). Many
credit card companies and similar lenders often ask that "corporate" cards for
small/new businesses be backed by someone personally.

If he does not need to raise any significant funding for this corporation,
then his personal finances are of little concern.

Similarly, other creditors should not be able to come after the corporate
assets.

Is your focus on credit ratings based on an assumption that this matter, or
because he would need to raise some kind of capital after incorporating?

~~~
Anon123123
Both really.

This guy is brilliant, and I'd like to work with him, but need to minimize
risk based on his past.

Is it a factor in VC funding?

If we want to raise VC funding later, should he be positioned as a non-
founder?

~~~
brk
I really don't know that there is a universal answer to your question. It
would also likely depend on if you are raising true VC money, or angel money.

In either case, you're talking about people (effectively) giving you money and
trusting you to handle it well. Whenever money and emotions/biased decisions
are involved, the outcome is not always predictable.

You would likely need to figure out how to sell or position his credit
situation to your investors. Did he run up a huge Visa debt by swiping his
card at the local strip club, or did he try to bootstrap some small operation
(or possibly his life) and end up with his debt too far ahead of his income?
Does his credit situation evolve from continued wrong or bad decisions, or is
it a one-time event?

Different investors will also generally want varying degrees of control over
the business funds. You might be able to find an arrangement where the funds
are more like an escrow, where you have to get approval before making any
commitments over $x,xxx.

And lastly, the business idea itself probably plays into this. If you told me
you had a Facebook app that was untouchable and allowed you to monetize
Facebook's user base significantly, I would probably invest in your idea even
if you were a drunken gambling addict. If your business idea is a Web2.0
virtual pet rock, well, then your personal credit issues don't really matter
because no one is going to invest anyway :)

