From: Sharon Villines (
Date: Sun, 13 Jun 2021 11:23:33 -0700 (PDT)
> On Jun 13, 2021, at 10:11 AM, Diana Carroll <dianaecarroll [at]> 
> wrote:
> Because of just what the name says: limiting liability. If things go badly,
> the corporation is liable, not the individuals.

Individuals are responsible to the extent of their investment so if you have 
put in $20,000, you can lose $20,000. There are also agreements some people 
make to set other liability limits — even higher than the amount invested.

I’m not a lawyer. I’m just from the generation that discovered how unnecessary 
they are unless you are an individual with possible liability as the result of 
the actions of others. (I wrote a few months ago about Nolo which caused a 
major revolution by teaching people how to divorce themselves, inc them selves, 
file court papers, etc without paying thousands of dollars it was just a 
question of paperwork.

It might make sense to incorporate is if as a group you are seeking a 
construction loan but I don’t think a bank would loan several million dollars 
on that basis without requiring personal guarantees and tangible assets as 
security. Being a limited liability corporation might be useful in a situation 
where you want to protect yourself from a liability lawsuit. Consultants often 
incorporate as and LLC for that purpose.

> Nor do I imagine our contractor would have been willing to sign an
> agreement with 30 different people.

We were working with a developer so he did make contracts with 40 households (I 
think 2-3 units were not sold at the point that he was applying for a 
construction loan.)

> I can’t imagine how a major real estate project could happen without there
> being a single legal entity involved.

Usually we get this question when a group is beginning or incorporating makes 
them feel real. When it can cost hundreds of dollars just to incorporate, what 
is the advantage? I don’t think many people understand that it costs money just 
to file the paper and then pay the fees every year plus filing tax returns, 
even if you have no income. 

It is likely the money could be better spent on flyers and tables at street 
festivals until large amounts of money are required. There are other ways to 
ensure transparency for how the smaller amounts of hundreds of dollars.

Lawyers are important and necessary but not magic. My lawyer a few years ago 
would tell me under which circumstances I needed a lawyer or I don’t. One of 
her guidelines was the likelihood of a legal challenge or misinterpretation of 
intentions when money or child custody cases is involved. A simple thing like 
20 people pooling a $100 each to do do publicity or have in introductory 
session with a lawyer, might be much more expensive and raise the amount 
required to $300.

There may be, however, state laws intended to protect buyers against deceptive 
real estate companies who take deposits on condos that are not built on the 
promise of having a condo at a certain price. The person believes they are a 
purchaser when in fact they are investors and all their money is at risk. So 
check state laws.

Sharon Villines, Editor & Publisher
Affordable Housing means 30% of household income
Cohousing means self-developed, self-governed, self-managed

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