Cohousing-L Mailing List: Limited liability

[Glen Orcutt (gorcutt]

Rowena Conkling asked:

>Thanks for your response.   The question is whether the additional expense 
>and formalities associated with a corporation are worth the protection given 
>by corporate "limited liability" of members?

Since our group is acting as a developer for our project and are taking on
the liability of millions of dollars of loans, we wanted the protection that
a corporation can provide us, limiting the liability of the members of the
corporation.  $800 a year (the cost of maintaining a corporation in
California) is a small price to pay for that protection.  

If your group is hiring a developer to take that liability for you, you may
be fine with a partnership.  But be careful, if the developer should go
bankrupt on your project), the group may get stuck with the liabilities and
suits.

Cohousing is a lower risk venture than a traditional development, but don't
be lulled into thinking that it is a no risk venture.  Any time you are
spending money you don't have, there is a risk.  And I don't have 3 million
dollars in my bank account. (I only have 2 million;)

Attorneys aren't highly regarded on this listserver, however I highly
recommend spending a few hundred dollars sitting down with the best Real
Estate attorney you can find asking her/him what the best corporate
structure is for your group.  It may be one of your best investments.

>What disasters have/might occur which insurance won't cover?
Your guess is as good as mine.  Bankrupcy of a contractor, developer,
material prices soaring, members backing out of their purchase, economic
depression. . .  I'm sure your attorney could tell you all of the bad things
that could happen. 

I hope I'm not scaring you or sounding gloomy, but it reasonable to conduct
the development of a multi-million dollar project with caution.

Peace,
Glen Orcutt
Valley Oaks Village
Chico, CA