Lesson 7
My home builder operates as an LLC. Surely that provides me, the customer, a bit of protection.
WRONG!!! The LLC will only provide protection to the builder, and NONE to the customer. Here are some examples to demonstrate this.
Hypothetical Situation. Bob is a retired, with $1,000,000 in cash, and wants to start a small landscaping business. While working on his first job, Bob negligently causes a tree limb to fall on you, causing you $500,000 damages in medical costs and lost wages. Here are several scenarios that you might encounter.
Scenario 1. Bob did not make any effort to incorporate his business, and just operates as a sole proprietor. You can sue Bob the millionaire for the full $500,000 in damages. Since Bob had not protected his personal assets, all his assets, personal and business, are vulnerable.
Scenario 2. Bob incorporates as an LLC and calls his business Bob’s Landscaping LLC. Bob then loans his new business $300,000 for startup capital. Now if you are injured, you may only be able to collect up to the $300,000 in the business funds. Bob’s other $700,000 of personal money is not in jeopardy. This is because you had a contract with Bob’s Landscaping LLC, you did not have a contract with Bob the millionaire. The LLC is a legal entity all to itself, and LLC means Limited Liability Corporation. In other words, Bob the millionaire has limited his personal liability.
Scenario 3. Bob is really getting smart and forms several more LLCs. Now he has Bob’s Landscaping, Bob’s Mowing and Blowing, and Bob’s Tree Limb Removal Services. Bob the millionaire has loaned each of his businesses $100,000 in startup capital. Now, if you are injured by the Tree Limb Removal company, you guessed it, you can only hope to recover the $100,000 that the Tree Limb Removal LLC has available, and you just give up on the other $400,000 of your damages. All of Bob’s other businesses are untouchable.
Now, some of you are thinking you would just sue Bob the millionaire personally for your remaining damages, but the laws that establish the LLC make this VERY DIFFICULT by design.
Or you may think you would sue Bob’s Tree Limb Removal Services against any future earnings. BUT you may have to pay your attorney every month to fight to collect any additional funds, OR Bob the millionaire can just shut down the one LLC and continue to operate the others. Now you also have to pay your lawyer to continue your fight in federal bankruptcy court. Very expensive, and no guarantee you would ever receive anything.
In our own real-world example, our home builder was Brint Construction Inc, operating as an LLC. The owner Tim Byrom had protected his personal assets, and their attorney sent us an email in December 2022 that the business would just file bankruptcy if we continued our lawsuit against them. This email read “Because of the pending litigation, I recommended to Mr. Tim Byrom that he consider the filing of a bankruptcy case to bring the lawsuits to a close, and he retained Gabe Perez of Galveston for this purpose”.
Around this time, we also learned that there are SEVERAL businesses run by the Byrom family.
- Brint Inc.
- Brint Construction Inc.
- Brint Land Development LLC
- Brint Piling Services
- Brint Builds
- Brint Demo and Dry
I do not know why Brint needs so many business names, but I do believe that some less than ethical builders run multiple businesses just so they can shut down and start up new as they see fit.
AND it is a fact that Brint’s lawyer told us they would file bankruptcy to avoid our pending lawsuit.
TIP TO AVOID THIS: Almost all builders will operate as an LLC. Be sure to hire a builder that does NOT have a proven track record of threatening to file bankruptcy to avoid lawsuits.
