Yes, in other words, if Rackspace decides to sue you for running a company that was a fraud, then having a company doesn't shield you from fraud liability.
This makes perfect sense. Incorporation isn't the secret trick for conduct risk-free confidence jobs on people. You can't incorporate, sell Springfield the sham monorail, and skip town scot-free. Obviously, if your company is a criminal enterprise, all bets are off. On the other hand, the laws that provide alter ego liability aren't the secret key to unlocking corporate liability shields.
Since (a) the poster's company almost certainly wasn't a fraud, and (b) most companies that fail also aren't likely to be frauds, and (c) it is prohibitively expensive to attempt to prove in court that a company was a fraud, and (d) most of the officers of small startup companies aren't going to be in a position to pay at the end of a court battle, none of this matters.
Also: note how little of this has anything to do with how many shares the guy owns.
We are seriously geeking out here over something that isn't relevant to this guy's problem. Companies go out of business all the time; the company owners do not as a matter of course lose their houses!
I think that with 'under-capitalized' they had something else in mind than what you're reading in to it, and the fact that they probably are just two guys in a bedroom is what helps rather than hinders in this case, it is absolutely pointless to go after parties like that during collection, that's throwing good money after bad.
You're talking about spending 25 grand to recover three.
I agree with removing the ability to delete. Perhaps a "Redacted" button where the poster "taps out," karma hits are stopped, but the thread remains for those following the discussion. Maybe even having the thread optionally showing, like "dead" comments, would be ok. But I'm coming late to this conversation (late measured in minutes, not days), and there's no following it.
Second that this thing is unreadable now. I can't figure out what is going on other than some other people on HN know more about this situation than is in this thread.
There's an article on Google that lays out a bunch of tests that courts will use to determine that your corporation is a sham (for instance, if you mix your finances with the company's finances, perhaps by having the company pay your rent or buy your groceries). If you don't have a bona fide company, but rather a fraudulent scheme designed to shield you from personal liability, then the creditors of the company can pursue the shareholders of the company; this is an instance of "piercing the veil" called "alter ego liability".
It's also not relevant to your Internet startup owing Rackspace hosting charges.
Your comments on this submission have been excellent. Thank you.
Without starting everything up again, I'll just mention that the ability to pierce the veil depends some on which state you are set up in (pharma investors nearly insist on Deleware, FWIW).
It's very handy to delete comments to unwind flame wars. I've done it with people a bunch of times here. (If you disagree and it's important to you, let's take it to email rather than kick off a digression here).
This makes perfect sense. Incorporation isn't the secret trick for conduct risk-free confidence jobs on people. You can't incorporate, sell Springfield the sham monorail, and skip town scot-free. Obviously, if your company is a criminal enterprise, all bets are off. On the other hand, the laws that provide alter ego liability aren't the secret key to unlocking corporate liability shields.
Since (a) the poster's company almost certainly wasn't a fraud, and (b) most companies that fail also aren't likely to be frauds, and (c) it is prohibitively expensive to attempt to prove in court that a company was a fraud, and (d) most of the officers of small startup companies aren't going to be in a position to pay at the end of a court battle, none of this matters.
Also: note how little of this has anything to do with how many shares the guy owns.
We are seriously geeking out here over something that isn't relevant to this guy's problem. Companies go out of business all the time; the company owners do not as a matter of course lose their houses!