Cohousing-L Mailing List: Re: Limited liability

[Legal-All Lawyers (Salley]

From: Rowena Conkling - Cambridge Cohousing, MA
address:  salley [at] volpe1.dot.gov

Thanks to everyone for your responses.   I have yet to hear from anyone who 
had trouble with financial institutions - amazing!

To: David Neeley:

Your caveats about the possibility of "piercing the corporate veil" are 
precisely what have been concerning me.  I have personal knowledge of one 
case in which the court did just that and the plaintiffs were able to go 
after the corporate officers' assets.

I'm afraid people may feel that incorporation means no risk, which isn't 
true, especially in a situation where maintaining the corporate formalities 
may conflict with the goals of consensus management, lack of officers, and 
"fluid" finances, etc.  We have every intention of getting advice from an 
experienced attorney.   However, we will hopefully have identified the right 
questions to ask before doing so!

I suspect the fact that in this area (New England) the cohousing groups 
appear to be going with joint ventures reflects this recognition and also 
the fact that there is no provision in law for a limited liability 
partnership as yet.

Again, thanks for your comments.

 ----------
From: cohousing-l
Subject: Re: Limited liability
Date: Tuesday, August 29, 1995 6:28PM

>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?
>
>
You might ask again about limits of liability given to stockholders in a
corporation, nonprofit or no. Those who are making active decisions in
managing a corporation may not be able to escape personal liability that
results from those decisions.

For instance, if a corporation decided to authorize construction and wasn't
properly insured and someone was injured, those who made such a decision
might very well have personal liability just as if there were no 
corporation.

It is, though, tougher in most states to "pierce the corporate veil" as the
lawyers call it than it would be to go after partners in a joint venture.

By the way, corporate property can also be taken to satisfy a judgment. If,
therefore, a Coho property or the common area thereof were forfeited to a
liability judgment, it might be a hollow victory that the individuals aren't
liable.

As others have said, no project of any size at all should be undertaken
without consulting with a good real estate attorney. When you do, you might
bring up these points and see what he/she says.

Hope this is helpful.

David Neeley