Not quite. In the US this condition is handled at the back end. Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.

I have the impression the situations where that actually happens are at least arguably serious misconduct, and usually targeted at someone with significant assets.

A construction company that pockets ten million dollars and doesn't build anything probably can't shield its owner this way, but a single-developer software consultancy that pockets ten thousand dollars and delivers buggy code can.

In theory it’s based on whether the owner of the company intended to run it under capitalized in an effort to shirk liability.

But the larger point still stands: Limited liability was granted “on the front end” without the entity needing to demonstrate a minimum amount of capital. You’re only pointing out that in the U.S. that it’s possible that “on the back end” the owners of the entity might become personally liable.

Yes, i’m just elaborating on OP’s point. The US system is different and basically more optimistic on the front end.

While extreme cases are the easiest to imagine, in real life the plaintiff almost always argues to pierce the veil and the defendant always argues the opposite, and both sides earnestly believe that they are right.

And in real life piercing the veil is extremely exceptional

It's so exceptional in the UK you can run a series of fraudulent businesses which are incorporated, "buy" services, don't pay for them, then declare themselves insolvent, rinse and repeat, and there's a fair chance you'll get away with it.

It's called phoenixing. There are good few bans for it every year, but almost no convictions for fraud.

Not to mention all the fraud the Turkish barbers etc are up to

Yeah but the veil doesn’t get pierced that’s super rare, which is more important than everyone’s emotional state.

Not in the US it’s not. LLCs don’t shield your assets from personal negligence. So if you have a single member LLC with no employees (very common), an awful lot of what prompt a successful suit will be because of negligence on your part.

Thats cause the software and computing industry early on, disclaimed all liability.

"Computers are hard, yo!". It devalues the profession.

And I thought no liability was bad enough... But no. Now its LLMs and " for entertainment purposes only". I take it management and leadership also read that, and don't give one fuck.

The ability to build reliable software has existed for a long time. Commercial airlines make heavy use of it, and serious failures are vanishingly rare.

The problem is building software to those standards of reliability is expensive and slow. Consumer software never justifies it. Business software rarely does. If you want me to accept liability for the consequences of bugs in code I write, I'm giving you a schedule five times as long and a price twenty times as high.

>Commercial airlines make heavy use of it, and serious failures are vanishingly rare.

Is this a joke? There's a major outage effecting flights at least yearly. The Delta one is from May...

[1] https://en.wikipedia.org/wiki/2022_Southwest_Airlines_schedu... [2] https://www.usatoday.com/story/travel/airline-news/2026/05/0...

The OP is talking about the software onboard airplanes, not the operational software used by airlines.

They should have said aircraft manufacturers, not airlines, but it’s clear what they meant.

And your mindset is the problem.

It does not need 100% error free anything. Hell, our food and goods we buy has error rates. Recalls, replacements, etc. Mistakes happen.

Liability is about taking responsibility for your stuff you emit. And the fact that software companies are getting worse shows me that there isn't any sort of maturity in this industry.

You can't even buy a fucking game without it being encrusted in anti-user DRM. And even on MS Windows with a Windows game that doesn't run, there is no basic warranty of "does this thing run?" You're basically shit outta luck if it doesn't. And if you bought it on Steam, better not charge back or they delete your account as a vengeance response. And lack of any liability and responsibility is why they can.

Its also a whole other thing to then rely on said software for correctness. That's what 'limited liability' is all about. If you need heavier liability, then sure, reach out and pay for it.

But the fact that software has gone from 'No Liability' to 'for entertainment purposes only' is a fucking farce for the software industry.

> You can't even buy a fucking game without it being encrusted in anti-user DRM.

You very much can. And notably, exceptions that do use it tend to be from giant public corporations.

Much the same in the UK. Usually some kind of fraud or failing to stop trading when it was obvious insolvency was unavoidable. No minimum capital requirements either.

> Running a corporation or LLC without sufficient capitalization can be grounds for piercing the liability shield in a lawsuit.

Which is exactly how it should be handled, IMO: Deal with the abuse situations directly.

Forcing new companies to capitalize with an arbitrary amount of money at time of founding penalizes small players who want to start a company. It's also not a hurdle at all for large players who want to commit large frauds.

> penalizes small players who want to start a company

That's a barrier to entry; and who likes to perpetrate those? Why big, established companies who lobby the government.

Ya we don’t have those in America, wait—

Is the gmbh pierce proof? Because then I like the situation where if you start with $25,000 under no circumstance can they get past the liability shield.

Usually, yes. There are a few exceptions, such as serious misconduct, tax fraud and not declaring insolvency when necessary. But as long as you're following the law, you're fine.

So, the exactly same as the USA then.

This is a core difference between common law and civil law. In common law systems, things tend to get sorted out after the fact, with a judge's discretion, only if things go really wrong. In civil law systems they try to design a perfect system of laws that makes problems impossible.

Have to prove fraud to get there. "Under" capitalization is a judgment call. Effectively, it's very rare. An LLC launches with effectively zero dollars literally dozens of times a day.

Haven't heard anything about LLC capitalization in this context. Liability shield can be pierced, but only if LLC is misused (i.e. "when the company is treated as a personal "alter ego" and used to commit fraud, injustice, or illegal acts"). Lack of capitalization is not one of the reasons as long as you treat it as a company, not your wallet.

No there’s lots of reasons it can’t be pierced. It doesn’t shield you from liability that results from your own negligence, and for owner operator businesses that’s a large attack surface.

I set up an LLC in the US for about $500 and pay Delaware a few hundred each year in fees. As it turned out, it was probably an unnecessary exercise and I probably won't renew in a couple years. But it wasn't a big deal.

Delaware is expensive and you must have had a very specific reason to build your LLC there, rather than for example in Wyoming - such that to raise capital, build a corporation, etc. Now if you want to shut it down in a couple of years, it's not exactly clear what you had in mind.

If you register your company in WY but will be doing business in e.g. MA, you will have to pay registration fee in both jurisdictions. Doesn't sound like a saving to me.

If you mean why not register in your state, then Delaware has some tax benefits I believe. Not sure they will apply in MA though, maybe somewhere else?

MA was going to be quite a bit more expensive. I did the transaction through Stripe and they use Delaware.

Since my business is in MA it doesn't matter where my LLC is, I would have had to pay registration fee for "Foreign LLC" in MA to stay legal. That is in addition to fees I would have paid to DE. Not sure if MA is so unique, but I don't think it is.

Situations have changed in tech so I'll probably keep my LLC for a while but when things come up for renewal probably no reason to. Associated with another company and not beating bushes for big time-consuming contracts.

> sometimes shit happens and debts go unpaid

What’s wild is that this is pre-debt. The banks will have their own risk math for you so it’ll be a completely separate set of hoops before you get to be in debt as a company. Most will not even talk to you if you have 0€ in the business account. I don’t feel like a company with no assets or income can do that much damage to their societies.

Also as a small company in the EU I have to have liability insurance for the company for any major clients so the insurance company also will make you jump through further hoops.

> I don’t feel like a company with no assets or income can do that much damage to their societies.

Keep in mind that those companies will almost always own some debit to their employees when they blow up.

IMO, $25k is a ridiculous amount of capital to require from a company before they can operate. But capital requirements are good, and they should be proportional to employment, not company existence.

It seems anchored in the risks of the past vs the possibilities of today.

There are ways to go into debt without dealing with banks. Any time you use something and are charged afterwards, it's a debt (which you could fail to pay by being broke by the time the invoice arrives). Common example - rent/lease. Or gas/electricity.

Those vendors can always require payment in advance, or a guarantor.

For a new business with $0 the individual running it will be the guarantor on those.

We have an UG for that. A GmbH is simply the wrong legal form for that sort of thing. You can create an UG with a single Euro on the bank account (and then immediately go bankrupt once you need to pay the notary).

No we don't. UG is still a GmbH bureaucratic monster which a bit less start capital. You still need to follow all taxation rules like GmbH, which costs you few more thousands per year (Bilanzeirung, Steuerberater, Abschluss, ...) just to be legaly compliant.

American LLC taxation is as simple as or even simpler than Anlage EÜR. And you don't need a tax advisor to do it.

That’s what they said? That UG solves the issue of having to have a start capital.

No, they are trying to sell UG as an equivalent to LLC, which it is clearly not.

> which a bit less start capital.

You may consider a capital stock of "at least 1€" even significantly less than 25k€. Not sure you are arguing in good faith.

Start capital is not the only capital you need.

UG forces you to pay 3-4.000€ per year on tax compliance. LLC costs 200-300$.

> Not sure you are arguing in good faith.

You are the one completely ignoring the running costs of UG (the same or bigger than GmbH) just to make UG look better than it really is. Now, please tell who is not arguing in good faith?

> UG forces you to pay 3-4.000€ per year on tax compliance.

Even in if that was true, the 25k€ difference remains (since the tax overhead is identical). Hardly what people would consider "a bit". Let's say the start capital is 3k€ for the UG and respectively 28k€ for the GmbH. That's almost a magnitude difference. And usually taxes become a challenge only when there is anything to tax or book. Are you "forced" to have a Steuerberater without revenue?

I am not even defending the situation. Just calling out your characterization.

> And usually taxes become a challenge only when there is anything to tax or book.

Not in Germany. Having a GmbH or UG is enough.

> Are you "forced" to have a Steuerberater without revenue?

Yes, and that costs quite a bit.

I was arguing that the cost of running a “cheap” UG is closer to the cost of running GmbH than running a LLC.

And these 25k, although a big burden, are not costs or fees. Once paid they are part of company balance which you can use to pay company expenses.

The real costs are running costs, and those are very close for UG and GmbH.

> I was arguing that the cost of running a “cheap” UG is closer to the cost of running GmbH than running a LLC.

Then maybe you should have said that instead of talking about start capital... The mere difference between UG and GmbH is the start capital, so what's your expectation?

> Then maybe you should have said that instead of talking about start capital... The mere difference between UG and GmbH is the start capital, so what's your expectation?

People were selling us UG as an LLC equivalent. I was just pointing out it's not. There's no LLC or Ltd. equivalent in Germany.

A UG and and a GmbH is legal-wise exactly the same.

OP’s point is that you don’t need money in the bank to open an LLC like you would in Germany.

You don't need money for the UG either. You might need money for operating expenses later etc, but that's not what OP complained about and should be similar for an LLC. (Depending on type of business, location etc)

There's other types of companies. Like UG or freelancers or GbR.

To clarify a point here, U.S. entrepreneurs (and unfortunately our union committees as well) find that sort of thing tolerable; the larger majority by an order of magnitude, U.S. consumers that aren’t currently (or planning to be) invested in a business, tend to be strongly opposed once they understand the outcomes.