This is so interesting because you could watch a 5 minute video on "limited liability" and dissolve all of those fears.

The company concept is a shield. Money is allowed to pass through to you, outside capital is not a tax event and everything you spend is deducted against the much smaller salary you paid yourself. You can have negative AGI, actually have a high compensation, and still get $1,200 checks signed by the President.

Risk is allowed to stay with the company, whether it has anything left to pay to the aggrieved investor or not. This knowledge alone acts as a deterrent to many risks.

You're really overthinking this.

This. Add on to the fact that none of your customers has any incentive to sue you or screw you (i.e. it almost never happens) and that you can get insurance for all kinds of eventualities. And you still have a limited-liability corporation.

I'm actually not overthinking it, because judge's remove the protection an LLC gives your personal assets for arbitrary reasons. Additionally, you need a multi member non spousal LLC to even get the protection in the first place.

I have a lot of assets to protect.

> because judge's remove the protection an LLC gives your personal assets for arbitrary reasons.

first you have to get sued: RARE

then everything has to go wrong: RARE

then it has to make it actually to trial court: RARE

then that one judge has to leverage an "alter ego" statute: RARE

> Additionally, you need a multi member non spousal LLC to even get the protection in the first place.

This is false.

> I have a lot of assets to protect.

Then protect them? Put them in different LLCs, trusts, foundations. To save money you can use a Series LLC which lets you separate liabilities or business lines into different series, about 20 states offer those, and outside the US the concept is called a "Segregated Portfolio Company". Use states where there isn't information about you in the LLC filing. You should basically have nothing in your name. Even better, you should have a negative AGI and be in debt on paper. If someone actually wins a civil lawsuit against you, you can tell them to get in line.

Arbitrary reasons being? Generally this happens if you’ve been grossly irresponsible with your companies’ funds.

As mentioned the first one is not having a cofounder who isnt in your immediate family, which for some people is fine and for me is honestly a waste of time and equity. Just another vector for failure.

Beinf grossly irresponsible with your companies' funds is an interesting way of saying "I tried to pay myself without the detailed advice of a skilled accountant and I made an oopsie and now the judge says I need to pay a lawyer ${sum_i_dont_have} to protect a random plantiff from becoming the new owner of my house"

Again, how amazing is your idea and execution and business networking capabilities that you somehow think you are gonna make more than $2.2M in 10 years of work, like you would at Google?

> As mentioned the first one is not having a cofounder who isnt in your immediate family, which for some people is fine and for me is honestly a waste of time and equity. Just another vector for failure.

so wrong lol. you seriously have no asset protection because you believe that? better yet, your actual asset protection strategy is having none and a completely misunderstanding the basics?

"There are two cases, one a federal bankruptcy case and the other an employment tax liability case that deal with liability of a member in an LLC. In Re Ashley Albright and Littriello v. United States, et al., remind us that proper asset protection planning, especially in the design of an LLC, is a necessity and without it the consequences may be disastrous. These cases are important because courts are beginning to view a single-member LLC as a disregarded entity under multiple scenarios in some states"

Literally the top result on google. Why are you insulting me?

Because you are still overestimating the issue and fell for some law firm's scare campaign. Whats the date on that huh?

That case was from 2001 and decided in 2003 and the world has evolved so much in the last 20 years. The primary validation is the use of these entities. And let's just imagine your two decade old view of the world is correct and also probable, nobody even needs to know you are a single member LLC. When "12 Forest Road LLC" owns your vacation home at that specific address and no further information exists about the LLC to even the state, the person that sues your other company that has outside capital and employees will never name the other LLC in the lawsuit, and if they did it is much more likely that it gets tossed out or at least that other LLC gets removed from the lawsuit.

And your real issue is that you worked too hard for your other assets that you haven't protected. Nobody needs to know your other assets are held by title holding single member LLCs.

> Why are you insulting me?

Can I insult you into actually doing something about it?

Ask yourself, is it more important for you to be right or more important for you to actually make deterrents and even absolute protections?

and let's not forget, you are using all of this as excuses to not even attempt profitable ideas.

> is the fear of being sued...

I can't discount it entirely, but... for many situations, that's probably a somewhat overblown fear. It's why you get insurance, pay professionals to do legal/paperwork stuff, and get on with your business. Almost anyone can sue for anything, but it probably doesn't happen anywhere near the number of times you might think it does. When you start, you're going to be too small to get sued in the first place. And being sued probably means you have paying customers, so you're already doing something right.

> too small to get sued in the first place. And being sued probably means you have paying customers

Apparently I'm the exception, but my business was pretty small (under $1M ARR), and one of our investors (which was also our largest client), sued us to pay his convertible note back. The company went bankrupt and after bankruptcy he sued my cofounder and I personally for the note. Still dealing with the whole thing. Every step of the way our other investors and lawyers were caught off guard, because the situation is apparently very rare, however, it still happened.

Having said that, knowing what I know now, I'd prefer to start a business, with all the issues and risks that it might entail, rather than let fear keep me from doing it. It's also been a hell of a learning experience and I'm sure it's all going to help me in the future.

interesting (sorry you had to deal with that).

"having investors" is perhaps a different sort of business than other small businesses that start up. many of the smaller businesses (esp software) don't have 'investors' as such, though some have taken out bank loans.

You are totally right. And it will take me a very long time before I want to have investors again (if ever at all).

Wow, sounds pretty crazy. Did the note have personal guarantees? My understanding is that kind of thing is very rare. If not, what grounds did he have for suing you personally? Fraudulent conveyance or breach of fiduciary duties? Something else?

It is not crazy and not rare. I can sue you right now, personally, and you would need to pay someone to defend you in court.

If you've never owned a business and have no relation to me, then probably you'll survive the suit just fine.

But as you can see, OP had a business relationship with the person involved, and though OP probably won the suit in the end, he still had to pay oodles of money to protect himself. And if he lost, well, then there's my point.

The note did not have personal guarantees. But that didn't stop him from trying to claim alter ego. Like the sibling comment says, even if we win, we still need to pay tons of money to lawyers just to deal with it, and put in a lot of our time as well.

Our lawyers and other investors do think this situation is pretty rare, as the guy ended up killing the business that could have given him a better return on his money, and also screwed everyone else involved in the process.