Thoughts on limited liability (corporations and LLCs)

[Oiler]

A wrinkle on the question:

Should there be llc's where the public doesnt get to see which ppl are managing or owning it?

Should ppl be able to own assets confidentially thru holding vehicles?

 

[TeTe]

A wrinkle on the question:

Should there be llc's where the public doesnt get to see which ppl are managing or owning it?

Should ppl be able to own assets confidentially thru holding vehicles?

I do. I work for very successful, privately owned LLC (annually ranks in Crain's top 25 largest privately held companies in the U.S.) They are where they are today because of their lack of transparency. They've been around for 40 years and most people have no idea what our company does.. until we tell them what we sell under what brand.

But then again, a privately held company should have that right.

 

[Kevin Rudd]

I say don't give em any limited liability and make that liability joint and several with no right of contribution. And while we are at it, let's get the government out making sure corporations have adequate assets to cover its liabilities. Let's make business and investing like a game of straws where everybody gets rich fucking everybody else over except once in a while a random person gets selected and fleeced so we can feel good about knowing that once in a while somebody gets punished for the evil things they do..

I think you just basically defined pure capitalism right there.

 

[HIMBOB]

I can not be expected to be accountable for the actions I have no control over and no knowledge of. Nor can I be expected to know the actions of every part of every company i own shares of.

So yes it should remain legal.

 

[Oiler]

I do. I work for very successful, privately owned LLC (annually ranks in Crain's top 25 largest privately held companies in the U.S.) They are where they are today because of their lack of transparency. They've been around for 40 years and most people have no idea what our company does.. until we tell them what we sell under what brand.

But then again, a privately held company should have that right.

Its funny. These days it is increasingly easy, particularly for beginners or just people that are rushed or not careful, to fuck up their attempts to stay private.

 

[TeTe]

Its funny. These days it is increasingly easy, particularly for beginners or just people that are rushed or not careful, to fuck up their attempts to stay private.

I honestly think that not only has my company been so successful because of their ability to stay private, but it has brought a real sense of job security to all those involved. In the 40 years we've been around, we've only had two upper level managers leave.

If my company decided to go public years ago, all bets would have been off. The other nice thing is, when my company sells, which will be very soon since the owners are very old and want out.. they have the luxury to sell to whoever they want, with the requirement that they keep the current staffing and direction they have been working with. No stockholders to answer to.

 

[ben236]

This is a more complex issue than presented here so far.

Do you mean total elimination of limited liability so any liability of the company can be gotten from the shareholders? That seems like it would be scary for mutual fund owners.
Example: I own a single share of BP. Government sues BP for damages. Government wins, and proves damages that exceed BP's assets. Do you want the government to be able to come after my assets to satisfy the damages?

I think this could easily be sorted out with liability insurance.

 

[RerouteToRemain]

Why does everyone always focus on massive companies in these topics.
What about all the small businesses/LLC's that make less than say 100k, 250k or even 1m. What are your thoughts on those. They certainly couldn't afford to get sued to no end. Nobody would want to take the risk to start a new business and more monopolies would be created.

 

[SleepyBoy]

LLCs are government intrusions into the free market, albeit a 100% necessary one.
There is no way the economy would function without it.
But it is still a privilege, that could and should be revoked when companies display the absolute worst behavior. I am talking about making the headline news because of what most would deem outright evil behavior

For instance, I would have pulled Bayer's charter If i had the authority in what ever state held their charter when they knowingly infected thousands of people with the HIV virus because they wanted to turn a profit off of bad medicine they knew was bad, and were told not to sell.

OR any other company where they knowingly put people's lives at risk, they are warned not do so, and then go ahead and make a conscious decision throughout the chain of management to do it anyways for the sake of money.

There is no place in the market for serial criminals, pathological fraudsters, and homicidal maniacs. Government privileges shouldn't be extended to the lowest scum of the earth.

of course I wouldn't be even talking about pulling corporations charters if our justice system wasn't scared to death of arresting the economic elite for doing things that anyone in the public would be sent to jail for life.

 

[Zankou]

It's not a real world problem. Limited liability comes mostly into play because of complex financial contingency damages. For example, a technical software company screws up, delaying the launch of a new product, causing a large company to crash. Should all the stockholders in that software company each be personally liable for the full loss BEYOND their actual ownership interest? And even there, you can pierce the veil when there is fraud or insufficient capitalization.

Almost never is it a matter of private citizens being unable to collect for wrongdoing because of the limited liability laws.

You may hate Bayer all you want, but the problem is not that their stockholders aren't infinitely liable for Bayer's legal exposure. It's that Bayer doesn't have enough legal exposure that is the problem.

 

[Oiler]

I think this could easily be sorted out with liability insurance.

The ins cos act like assholes ... deny everything, refuse to pay

 

[SammyPops]

Opposed.

Corporations aren't people.

This.

A corporation cannot truly face the same consequences as a person.

 

[ChainFlow]

It's not a real world problem. Limited liability comes mostly into play because of complex financial contingency damages. For example, a technical software company screws up, delaying the launch of a new product, causing a large company to crash. Should all the stockholders in that software company each be personally liable for the full loss BEYOND their actual ownership interest? And even there, you can pierce the veil when there is fraud or insufficient capitalization.

Almost never is it a matter of private citizens being unable to collect for wrongdoing because of the limited liability laws.

You may hate Bayer all you want, but the problem is not that their stockholders aren't infinitely liable for Bayer's legal exposure. It's that Bayer doesn't have enough legal exposure that is the problem.

How would Bayer's exposure be increased?

 

[weich]

How?

First, banks, angel investors, and anyone with money to lose would have to be very cautious about investing in small business.

For example, Let's say you have 500K in retirement. A trusted friend, relative, etc, comes and asks you to invest 25K in his business. The plan is sound and you stand to make 10K to 15K on that money. Would you invest if there was no liability protection and you could stand to lose not just the 25K you have invested, but the remaining 475K in your retirement account PLUS your house and any other assets? I wouldn't.

Any brick and mortar store is essentially a wet floor, slippery sidewalk, etc, from being sued for major losses. I wouldn't open a store, invest in a store, or do anything remotely similar for the fear of losing everything.

Let's say that I was crazy enough to open up a business and put all of my assets on the line. I surely wouldn't hire anyone. What if I had a landscaping crew and my employee leaves a rake that partially blocks the sidewalk. A person coming down the street trips, falls, and ends up paralyzed. Now all of my assets are up for grabs even though I didn't directly cause the injury, and no obvious intent to cause injury.

 

[kpt018]

It's not a real world problem. Limited liability comes mostly into play because of complex financial contingency damages. For example, a technical software company screws up, delaying the launch of a new product, causing a large company to crash. Should all the stockholders in that software company each be personally liable for the full loss BEYOND their actual ownership interest? And even there, you can pierce the veil when there is fraud or insufficient capitalization.

Almost never is it a matter of private citizens being unable to collect for wrongdoing because of the limited liability laws.

You may hate Bayer all you want, but the problem is not that their stockholders aren't infinitely liable for Bayer's legal exposure. It's that Bayer doesn't have enough legal exposure that is the problem.

I think this post identifies the issue some people are having with limited liability entities and also explains why they need not worry.

These business structures are crucial and necessary to conduct business. I think people who take issue need to do some reading on what "limited liability" actually means.

 

[panamaican]

I agree with you.

But I can see the point of there not being limited liability. There are a couple ways to get there. You could get there through moral duty, i.e. one could argue that it is morally just to impose a duty on investors to investigate what their investment hath wrought and withdraw from a liable action. Similarly, you could get there under a theory of culpability. Even though you might not be very culpable as an investor with no control over what the entity does, you are still more culpable than the innocent victim/creditor, especially if their actions are faultless. You could also get there with the idea that, in benefiting from the actions of the company through your part ownership thereof, you should compensate at the least for your share of the harm caused others.

I agree that's the theory for removing limited liability but it's empty in practice. Any company with the power to do so will simply indemnify it's shareholders (it's precisely that strategy, coupled with tax concerns, that led to the creation of LLC's in the first place). Plus, innocent victims are better served by companies carrying insurance policies than by suing the shareholders themselves.

As we all know - it doesn't matter if you win. It matters if you can collect. And suing Joe Nobody for some corporations malfeasance doesn't matter if Joe doesn't have the money to pay his share of the debt. The victim gets no cash and Joe just has shit credit and a lien against whatever assets he might possess. How does that help anyone?

 

[panamaican]

A wrinkle on the question:

Should there be llc's where the public doesnt get to see which ppl are managing or owning it?

Should ppl be able to own assets confidentially thru holding vehicles?

There's almost no such entity. There are degrees of difficulty in finding the owners but at the end of the trail there is always a person.

But to answer the question as asked - of course there should. Of what concern is it to the general public who the owners of LLC X are, so long as the government knows/can find out? So long as the owners and the LLC are meeting their obligations to their state, country I can't see the problem.

 

[Oiler]

There's almost no such entity. There are degrees of difficulty in finding the owners but at the end of the trail there is always a person.
.

Yes but should you have to file suit and issue subpoena to see who this person is?

 

[Denter]

I wouldn't invest in stocks if it opened me up to unlimited liability without any way to effectively control the conduct of the company.

This.

 

[panamaican]

Yes but should you have to file suit and issue subpoena to see who this person is?

I think so.

It's a privacy thing. Maybe I don't want people prejudicing my company because they don't like me or vice versa. Maybe I don't want people targeting me personally to get some kind of business advantage. Things like that.