QUESTION
My father-in-law started a business as an LLC few years ago. He named all his daughters owners, with him owning the majority share. The business failed, and now he is being sued by creditors. He told the family these creditors can’t come after us and the other siblings, because he is the majority owner. Is this true, or should we get a lawyer?
ANSWER
Your wife is probably not in danger, unless she signed paperwork making her liable for a loan or liable with a creditor. If she signed official, legal paperwork – like if she went down to the bank and signed on a loan – then she’s liable. It’s that simple. That would make her, or any of her siblings who did this, co-makers on the loan.
Your wife, and any of her sisters, who signed on trade accounts taking supplies from a supplier and paying them could also be liable. But they are not automatically liable simply because they were listed as minority owners in an LLC, or even a sub-S corporation. If it were a general partnership, there’s a possibility they could be liable.
That’s one of the reasons I hate general partnerships. I hate partnerships in general, but I hate general partnerships, too!
In other words, I think you’re okay. I would still advise speaking with an attorney, and giving him or her all the details of this situation, to be absolutely certain.
QUESTION
What do you think about online investing apps, and the way they allow you to jump in and out of stocks for really low fees?
ANSWER
I don’t think about them, and I don’t use them. I don’t play single stocks—period.
There’s a ton of research out there showing that people who play individual stocks on their own—or with their broker, or with a golfing buddy—see a rate of return of about 7% on average. You can make anywhere from 10-14%, on average, with good growth stock mutual funds.
I could probably play single stocks more intelligently than most people, but why? If the average is noticeably less than I’m seeing with my mutual funds, why bother going there? Plus, with a mutual fund portfolio, you’ve got someone who does this kind of thing for a living managing and researching your investments for you in your best interest.
I don’t have an app on my phone that lets me trade stocks, nor do I plan on getting one. There’s nothing wrong with apps, in general, but I’ll never recommend jumping in and out of single stocks as a method of investing.
Financial advisor Dave Ramsey is a prolific author and radio host.