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How does limited liability work exactly?

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breakaway

Member
What is the name of your state (only U.S. law)? CA

If I start a limited liability corporation and get sued, how much is the maximum amount I would be liable for?

I have heard that it is the amount that I "invested" in, and it is not based on profits or revenue of the corporation. So if I only invested $1,000 of my own money, then that is the max amount I would lose?
 


justalayman

Senior Member
https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.shtml

http://www.sos.ca.gov/business/be/filing-tips-llc.htm
 
Last edited by a moderator:

LdiJ

Senior Member
What is the name of your state (only U.S. law)? CA

If I start a limited liability corporation and get sued, how much is the maximum amount I would be liable for?

I have heard that it is the amount that I "invested" in, and it is not based on profits or revenue of the corporation. So if I only invested $1,000 of my own money, then that is the max amount I would lose?
You heard wrong. Its not that simple at all. If the person suing you is unable to pierce the veil of the LLC then that would be the only money you might possibly lose, because that is the only money you invested in the LLC. However, if the veil of the LLC can get pierced (which it often can) then you could be at risk to lose much more.

The way to avoid that problem is to ensure that the LLC has sufficient liability insurance for the nature of its business.
 

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