business liability

pboychuk · 07-30-2008, 09:54 PM

I am considering starting a line of products used for infants. is this stupid? I really like the idea, there is a competitor who seems to be doing pretty well. But,
I am afraid of some type of lawsuit, God forbid something happened. If I formed an LLC, would it really limit my liability if the product harmed a consumer, or would my personal assets be at risk.

2gould · 08-03-2008, 02:28 PM

Short answer - it depends on how you run your business. Setting up a corporate entity does not automatically protect you from liability; however, if you operate in accordance with your state's corporation statutes, you should be okay.
The best advice however is to seek the quick advice of a corporate lawyer.

RLorenzen · 08-03-2008, 06:17 PM

The members of a L.L.C. are only liable for what they have invested into the organization, therefore they have "limited liability". So, the only personal assets at risk would be the ones that you invested into your company.

Disclaimer: This is not legal advice.

matt_15 · 08-03-2008, 07:43 PM

Rlorenzen, does this mean that you can only loose the money that you have invested and no more? So, if somebody was to sue you, they can only sue you for as much as you have invested into the business? I appreciate any help

RLorenzen · 08-03-2008, 09:13 PM

Say you personally invested $10,000 into your company and the company has total equity of $500,000 and it is sued for $2,000,000. If your company loses the suit, the company is liable to pay that $2,000,000, however you personally are not liable. In this case the company may not be able to pay the $2M and it may end up going bankrupt. If that does happen and the company goes under, the most you lose is $10,000 because that is all you personally invested into the company. You personally are not liable for that $2M, only the company is. You would be protected from say losing your personal home because a business deal went bad. That is the meaning of limited liability and it is one of the benfits of creating a L.L.C.

Again, this is not legal advice.

IceDog · 08-04-2008, 01:48 AM

I believe the only exception to the limited liability is if the llc member conducts fraud. In which case, personal assets are seizable.

matt_15 · 08-04-2008, 05:18 AM

Thankyou, appreciated

2gould · 08-04-2008, 03:06 PM

Quote:

Originally Posted by IceDog

I believe the only exception to the limited liability is if the llc member conducts fraud. In which case, personal assets are seizable.

That is incorrect. There are multiple ways a plaintiff can reach individual assets. If you would like the full range of possibilities, speak with an attorney or do some research on the web.

RLorenzen · 08-04-2008, 06:52 PM

Here is a list of the exceptions to the limited liability: LLC Basics

Most of them are pretty obvious.

pboychuk · 08-11-2008, 08:15 PM

So probably in most liability cases, the prosecutor would try to prove that in some respect you intermingled your business with personal.. So if I paid for my home rent with my business account, I would be screwed. So i suppose if/when I do start this business I will be very careful to keep my finances seperate, pay myself a salary and when business gets rolling get liability insurance.

mirage12 · 08-12-2008, 04:13 AM

For me, you just need to choose to choose the proper business entity. You can seek help from your lawyer and your accountant.

jasaunders · 08-12-2008, 10:37 AM

Quote:

Originally Posted by pboychuk

So probably in most liability cases, the prosecutor would try to prove that in some respect you intermingled your business with personal..

BINGO! I successfully won a civil case after subpoening accounting records which were then used to prove that the LLC was nothing more than a shell that had no assets and a managing member was intermingling funds. Using a CPA will help you determine how to protect yourself financially.