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Comment by tptacek | Hacker News Reader

One of the reasons people do Delaware instead of their home state is that nobody knows how psycho their home state incorporation laws are going to be. For instance, several states require you to run ads in the paper announcing your incorporation. At least one --- New York --- allows individual shareholders of a company to be held liable for wage claims by employees!

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If that's the worst the other states have to offer — a requirement to publicly announce your incorporation and piercing of the corporate veil in exceptional cases — they don't sound very "psycho".

Personal liability for corporate salary claims is psycho.

You might be able to make a case that the institution of the limited liability corporation, as it currently exists in some particular place or time, produces more good than harm; but you cannot make that case by declaring minor variations in the institution to be "psycho".

Hm. Disgruntled former employees in failed New York startups can go after the founders houses. Can I call that "psycho"? Hey, I just did!

I only hire people I know I can pay, and when I have the money to pay them. And if that money dries up then their employment ends as well.

I don't think it's unreasonable for employees to have some claim on the assets of their employer in certain circumstances. It certainly isn't psychotic. Although it might be psychotic to hire people, use their labor to buy yourself a house, then fold the company and claim your assets are beyond reproach.

Nice. So, if I have a house, and I start a company, and something goes wrong, and you lose your job, you think coming after my house is reasonable. Because after all, we shouldn't hire people unless we're sure we'll always be able to pay them. Because that's how business works.

Thankfully, all this really means is that people will incorporate somewhere else where crazy rules like this don't apply.

Respectfully, if something goes wrong you should get rid of your employee before you rack up a huge debt to them in unpaid wages, yes.

I don't think either one is psychotic; maybe the term you're looking for is "psychopathic", which has mostly been replaced with "sociopathic".

Yes, you can certainly call it "psycho", and I don't know if it's actually true in general (I doubt it!) [edit: true that New York corporation shareholders have no limitation of liability for wage claims] but doing so does not succeed in making a case that some other policy is better.

But incorporating in Delaware doesn't make you immune to the laws of your home state. In fact, it allows people who want to sue you to potentially sue you in either state, thus doubling the amount of applicable laws (and possibly forcing you to defend a lawsuit in Delaware, which would be expensive because of travel).

I believe that is very much not the case, but I'd welcome a credible citation to your claim.

I could be wrong, but I got this from the book "Asset Protection" by Adkisson and Riser (well known attorneys in this area):

Under state law, having a registered agent in the state of incorporation creates nexus sufficient to allow the corporation to be sued in that state. This fact alone may affect the decision where to incorporate. A jurisdiction where jury verdicts tend to be very conservative may be preferable to one with a reputation for runaway jury awards. The cost of defending a lawsuit may also be a significant factor in this decision. Defending a lawsuit in the owner's home state will be substantially cheaper than defending the same lawsuit across the continent [or as one person here says, across the world]. This may be a factor in deciding where to incorporate

And you can always be sued in the state in which you are operating. So it seems that you can be sued in both states.

That's actually not true, about New York. You're referring to the veil-piercing doctrine, and that only applies in very rare situations, such as where the shareholders set up a fake/shell company solely for the purposes of trying to shield themselves for legal liability for torts, taxes, or other legal shenanigans (IOW, a sham company).

Pointers to the very rare situations that applies would be welcome. Good to know (we were a DE company long before I ever heard about the veil piercing thing).

Here's some cites of mine:

http://www.illinoisconstructionlawblog.com/2009/04/articles/...

http://www.wysr-law.com/articles/liabilityprotection.pdf

http://www.eminutesonline.com/why-in-the-world-would-anyone-...

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