liability
Is there personal liability when a business gets sued?
<p>I am working on some software for a business I want too open. I want to try my best at creating my own terms of use until I get enough money too hire a lawyer to help me through all the legal stuff. </p>

<p>If my business got sued and it lost, am I personally responsible for the assets? Is there a chance I could go to jail? Of course I don't want to be sued and I don't think I'll be sued but I want to know the worst case scenario. Is it that my business goes under or that I may have to pay out of pocket ect. </p>

<p>This business will be a website that </p>

<ul>
<li>allows people to post videos and charge money for them</li>
<li>The business will take a certain percent of the money</li>
</ul>

<p>I plan to do everything on my own and do not want to include anyone in this business. I live in Michigan, United States.  </p>

<p>You will have to find an answer better than listening to a random bloke posting on law.stackexchange before you start your business, but in many places you would start a "limited liability" company, which means effectively that the company is liable with every penny it owns, but the owner of the company (you) is not liable. </p>

<p>Exceptions are usually if you intentionally extract so much money from the company into your own pocket so that it cannot pay its debts, or if the people responsible for the company do things that are criminal. </p>

<p>Now with your particular business idea: If people upload videos without owning the copyright, then depending how you handle the situation, your actions <em>could</em> be deemed to be criminal, and then nothing protects you other than a good lawyer. Who will not work for you for free, so if your company has no assets, you will need your own money to pay him. </p>

<p>The answer is no, in THEORY.</p>

<p>The whole idea of a corporate form is "limited liability." That is, an "incorporated" entity or an LLC is a separate and distinct entity from its owner, and has a separate set of pockets.</p>

<p>Now, to enjoy corporate protection, you must conduct your business like a corporation. For instance, you have to file incorporation papers, keep corporate records, hold corporate meetings complete with minutes, if only between "yourself and yourself." You must also avoid commingling corporate and personal assets.</p>

<p>Corporate officers are largely protected by the <a href="https://en.wikipedia.org/wiki/Business_judgment_rule" rel="nofollow">business judgment rule</a>. That is, they can escape censure in "borderline" situations where individuals  will not. This holds true where you conduct yourself as a corporate officer and/or director normally would.</p>

<p>But if one doesn't observe the corporate formalities alluded to in the last paragraph, there could be a <a href="https://www.nolo.com/legal-encyclopedia/personal-liability-piercing-corporate-veil-33006.html" rel="nofollow">piercing of the corporate veil</a> where the corporation is treated as an extension of yourself, instead of a separate entity, leading to personal liability. This could also happen if you don't conduct business with the care and skill of a reasonable website operator, for instance, in preventing violations.</p>
