Path: utzoo!attcan!uunet!cs.utexas.edu!rutgers!mcnc!rti!bcw
From: bcw@rti.UUCP (Bruce Wright)
Newsgroups: comp.sys.ibm.pc
Subject: Re: shareware authoring (company requirement ...)
Summary: Corporate liability
Keywords: business
Message-ID: <3422@rti.UUCP>
Date: 13 Jan 90 05:32:43 GMT
References: <10889@attctc.Dallas.TX.US> <3412@cpoint.UUCP> <25AD7AFC.25749@maccs.dcss.mcmaster.ca>
Distribution: na
Organization: Research Triangle Institute, RTP, NC
Lines: 29

In article <25AD7AFC.25749@maccs.dcss.mcmaster.ca>, cs4g6ag@maccs.dcss.mcmaster.ca (Stephen M. Dunn) writes:
> In article <3412@cpoint.UUCP> alien@cpoint.UUCP (Alien Wells) writes:
> $	- Run the thing as a corporation
> $		o all liability is corporate
> 
>    Well, in theory.  If you need a loan, though, most banks (at least
> here in Canada, and likely in the States too) will require a personal
> guarantee for the loan, defeating a large part of this protection.  I
> know you can scream that "This isn't fair", but you're pretty well
> stuck with it.

Banks require substantial evidence that you can repay the loan.  In
practice, if the company has been going for several years and is
consistently profitable, and if its projections, existing liabilities
and assets look OK, a bank will lend money without a personal guarantee.
In practice new companies can't qualify under these rules, so you do
have to give some sort of personal guarantee or you have to find financing
elsewhere (banks are *extremely* conservative ... but there are lots of
other ways to finance a business).

The major benefit of limited liability is not to limit loan liability -
it's to limit lawsuit liability.  It is possible for a lawsuit to
find a company owner personally responsible for damages caused by the
company, but it is *much* harder to collect anything if the company is
a corporation.  Not impossible though - a corporation isn't a license
for fraud, and if the court finds that a corporation is a sham created
in order to commit fraud, they may assess substantial punitive damages.

							Bruce C. Wright