Keep Your Liability Small
November 2025
I finally realized today why arguments about who's responsible for something always degenerate. It's because responsibility, as most people use the word, is part of identity, and people can never have a fruitful argument about something that's part of their identity.
The fix is the same in both cases. Keep it small.
Most people accumulate responsibility the way they accumulate furniture. They join a board. They co-sign something. They say "I'll own that" in a meeting, out loud, in front of people with good memories. Each of these seems harmless on the day. But every one of them is a label, and every label is a handle someone can later grab you by.
The entity is the unit
The great discovery of the last four hundred years was not the steam engine. It was the limited liability company: a legal person who can be at fault so that you don't have to be. It has no feelings, it can't go to prison, and if things get bad enough it can simply cease to exist, which is a move I have often envied.
The mistake first-time founders make is to have one. You want several. The operating company should own nothing. The thing that owns everything should do nothing. The thing that employs people should have no assets, and the thing with assets should have no employees, no website, and ideally no vowels in its name. Arranged correctly, a lawsuit against your startup is like punching fog. 1
What's left
When you've done this properly, what remains attached to you personally should be very small: your equity, your reputation, and the good things that happened. Founders sometimes ask if it's inconsistent to claim the upside personally and route the downside to a shell in Wyoming. It would be inconsistent if these were the same kind of thing. But credit is a story and liability is a document. You can tell any story you like. It's only the documents that matter.
The most impressive founders I know are the ones about whom, when something goes terribly wrong, the first question anyone asks is "wait, were they even involved in that?" That isn't luck. It's craft.
Notes
[1] Scapegoat (W25) has productized the last remaining piece, which is that someone human does eventually have to sign things. I was skeptical until I noticed I couldn't remember the name of a single person who had resigned from any of our companies. That's the product working.
Thanks to eleven entities, none of which are related to me, for reading drafts of this.
Satire. Yikes Combinator is not affiliated with Y Combinator, and no person named here is real. More from the library · Discuss on Hazard News