But what if...

in Forum: Startup Funding

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Jul. 18 2008 at 9:09 AM
Posted by: DeepBlue “Quote Reply
Hi everyone, I've been visiting SUN for a while, but until now have never joined and posted. I have done quite a bit of work (electronics mostly) over the years with inventors. One particular project has progressed through patenting and the building of a working model for presentations, etc. The market for the product is very good. The inventor has put together a team and is going to look for start-up money. He has invited me to join the team for a stake in the new business. Since the new business is incorporated, are the team members shielded financially in the event the start-up fails? While the possible return is great, I can't risk my house, etc. (Sorry if this sounds naive; my days are spent with my nose to the circuit boards, not in the Wall Street Journal! Any advice on how I can evaluate the offer would be appreciated.) Thanks
Jul. 18 2008 at 1:16 PM
Posted by: robertj “Quote Reply
In general - employees are not responsible for the obligations of the corporation. Stockholders are usually not responsible for the corporate obligations as long as the corporation has been properly maintained. Officers are normally not personally responsible for the corporation's debts etc - however, if their "behavior" is inappropriate that could change. Just make sure you understand what (if anything) you sign. Business Growth Masters, LLC - Capital Catalysts for Entrepreneurs Home of the Scalable Business Plan and QuikStart Capital Programs http://www.bizgrowthmasters.com info@bizgrowthmasters.com
Jul. 18 2008 at 1:41 PM
Posted by: KevDev “Quote Reply
DeepBlue: To put what Robert said in smaller words, if your corporation is properly structured, what you can lose is limited to your investment. Don't want to lose your house? Don't invest it. And I would underline the suggestion that you understand anything you sign, and emphasize, get it in writing! Good luck! Find out what a business plan is all about and get started on your plan with this introduction. FREE! Business Plan Basics! You wouldn't build a house without a blueprint. Why build a business without a plan? Build Your Business Plan!
Jul. 18 2008 at 7:34 PM
Posted by: CraigL “Quote Reply
When you say "a stake in the company," what does that mean? Will you be a full partner? If so, you may end up sharing liabilities depending on the way the company is organized. Remember that Arthur Andersen was a limited partnership, and when a few partners were sued, all the rest felt the pain. Otherwise, would you only own shares of the company? If that's the case, then you'd want to talk with an attorney, but I suspect you'd only lose the value of the shares; you wouldn't personally be liable. It comes down to what kind of "stake." Craig Landes --- Defining the undefinable. "There are 10 kinds of people in the world---those who understand binary numbers and those who don't." - Unknown --- Success = Passion, Patience, Persistence!