E.U. lumping SpaceX in with X?

[Cmaier]

EU considers calculating X fines by including revenue from Musk’s other firms

Musk could face DSA fines of up to 6% of global revenue—including SpaceX sales.

arstechnica.com

Look, I dislike Musk and X as much as the next guy, but the E.U. has lost its mind. It’s rapidly getting to the point where nobody is going to do business in the E.U. The risk of having vague rules interpreted such that you lose a percentage of *global* revenue, not just for the company being punished, but for related and unrelated companies (SpaceX is not related to X in any sense that has mattered up until this - and the Brazil thing).

 

[dada_dave]

EU considers calculating X fines by including revenue from Musk’s other firms

Musk could face DSA fines of up to 6% of global revenue—including SpaceX sales.

arstechnica.com

Look, I dislike Musk and X as much as the next guy, but the E.U. has lost its mind. It’s rapidly getting to the point where nobody is going to do business in the E.U. The risk of having vague rules interpreted such that you lose a percentage of *global* revenue, not just for the company being punished, but for related and unrelated companies (SpaceX is not related to X in any sense that has mattered up until this - and the Brazil thing).

Hmmmm … the potential reasoning is that Musk as the sole private owner is a single economic entity, which is why Tesla revenue would be exempt as Tesla is a publicly traded company. This is apparently the same rationale for why Brazil did the same thing. And of course I say “potential reasoning” since apparently the EU hasn’t made a final decision and this is a leak of what they’re considering. Personally, I think the idea has merit enough to be considered even if they don’t end up following Brazil’s example or if they do and a court shoots it down. In fact the removal of Tesla would be somewhat ironic since it was Tesla’s shares that went substantially went to financing Musk’s purchase of Twitter and its subsequent loss of value. Basically Musk has certainly connected his companies’ revenues together financially.

 

[Cmaier]

Hmmmm … the potential reasoning is that Musk as the sole private owner is a single economic entity, which is why Tesla revenue would be exempt as Tesla is a publicly traded company. This is apparently the same rationale for why Brazil did the same thing. And of course I say “potential reasoning” since apparently the EU hasn’t made a final decision and this is a leak of what they’re considering. Personally, I think the idea has merit enough to be considered even if they don’t end up following Brazil’s example or if they do and a court shoots it down.

from a legal perspective, this new trend is unheard of. It essentially annihilates the concept of corporate entities. But, whatever. The end result is that companies will start pulling out of Europe. You see it already, where apple is just refusing to launch features in europe because those features could result in it being fined like this based on laws that just state guiding principles and goals but don’t state actual rules about what can and cannot be done.

 

[dada_dave]

from a legal perspective, this new trend is unheard of. It essentially annihilates the concept of corporate entities. But, whatever. The end result is that companies will start pulling out of Europe. You see it already, where apple is just refusing to launch features in europe because those features could result in it being fined like this based on laws that just state guiding principles and goals but don’t state actual rules about what can and cannot be done.

While I don’t agree with everything the EU has done in the regulatory space, I don’t think that the EU is in too much danger here - it’s what? almost half a billion people with a combined GDP of approximately the US? Further Musk himself has financially linked his various companies together especially since the Twitter takeover, funnily enough most publicly through Tesla which is supposedly not being considered. Personally I wouldn’t mind seeing this idea tested, even if it fails in court. And again the EU themselves haven’t actually even said X will even pay fines yet never mind what revenue could be leveraged. It should also be noted that many countries in Europe, especially Germany and France, have a long history of viewing corporate governance and industry differently than the US with very different labor laws and regulatory frameworks than ourselves.

 

[KingOfPain]

Wasn't there a recent new message that fines couldn't be imposed, because Xitter's ad revenue was too bad?

Cliff is the lawyer here, but if Elon Musk (at least occasionally) handles his multiple companies as a single one by exchanging resources between them, why shouldn't the EU do the same?

 

[leman]

That’s exactly the question I was about to ask - does Elon have the possibility to move money between the companies? If so, the approach seems justified to me.

 

[dada_dave]

That’s exactly the question I was about to ask - does Elon have the possibility to move money between the companies? If so, the approach seems justified to me.

So I agree but I also think @Cmaier’s point is valid too. The primary reason for me to set up an LLC is to legally protect my personal assets and property from legal liability of my newly formed small business. I can still pour my personal money into my business, but at that point it becomes my business’ money. The same for the reverse, income paid to me from my business is now my personal property. This is true even if I have another business. So I should at some level be able to take money out from business A, put into my personal account, and then also transfer money to business B, without making each legally liable for the other according to that paradigm. To break that could break the concept of a legally independent business and make a business that much more risky for the small business owner.

That said I also understand the reverse argument that people like Musk use abuse a lot of these rules and the tight links between his personal businesses have potentially been what’s allowed him to commit the Infractions in the first place* - never mind all the shady shit large corporations do with shell companies and LLCs to avoid any financial responsibility whatsoever often legally. Again this is an area where we obviously need reform, some way to clamp down on the bad actors without threatening the average small business owner.

*if I remember right in the Brazil case they went after Starlink because at Musk’s behest Starlink were not abiding by the court’s orders with regards to Twitter. Situations like that. Depending on what and how the rules have been broken and how Musk’s actions affect multiple companies I could see an argument that more than one entity is involved and responsible. Although again the EU has not made an adjudication that “X” owes anything yet never mind that any other Musk company will be involved. They simply aren’t ruling it out and hinted that his behavior could involve more than just X. If they do fine X and others, Musk and whatever other entities would obviously challenge that and the court would decide if the EU’s claims and justifications were valid. Depending on what the court decides and how specific the justifications were to Musk’s particular situation, the result even if fines are levied against other Musk entities may not result in such sweeping consequences for businesses at large. That’s how I see it anyway. But naturally I’m neither a lawyer nor do I own a business.

 

[quarkysg]

So I should at some level be able to take money out from business A, put into my personal account, and then also transfer money to business B, without making each legally liable for the other according to that paradigm.

Actually, taking company funds for personal use, as I understand it, constitute criminal breach of trust. Company staff have to adhere to local company code.

Edit: corrected typo.

 

[dada_dave]

Actually, taking company funds for personal use, as I understand it, constitute criminal bridged of trust. Company staff have to adhere to local company code.

I’m referring to specifically the owner’s draw which especially in the case of a single member LLC is how you would pay yourself regardless. But as I understand it you can make such owner draws and properly record them as reducing the equity of your company even in non single member companies. But yes, even in the case of a single member LLC simply mixing personal and business funds can apparently lose you any protection from the LLC and even if done properly LLC’s protection is also not absolute. So again, not an expert under what circumstances your personal assets or other businesses can be put at risk.

 

[Nycturne]

So I agree but I also think @Cmaier’s point is valid too. The primary reason for me to set up an LLC is to legally protect my personal assets and property from legal liability of my newly formed small business. I can still pour my personal money into my business, but at that point it becomes my business’ money. The same for the reverse, income paid to me from my business is now my personal property. This is true even if I have another business. So I should at some level be able to take money out from business A, put into my personal account, and then also transfer money to business B, without making each legally liable for the other according to that paradigm. To break that could break the concept of a legally independent business and make a business that much more risky for the small business owner.

There are approaches for "piercing the corporate veil", but generally it has to be done on a case by case basis as the details always matter. In the US, it also seems quite difficult to pierce the veil which is certainly one reason this isn't common. But I'm also not well versed in law, let alone European precedent, so I can't say much about this specific instance, other than that seems to be what the EU regulators are trying to determine here: Is this a situation worthy of piercing the veil or not, and being able to defend it in the inevitable court case?

 

[quarkysg]

I’m referring to specifically the owner’s draw which especially in the case of a single member LLC is how you would pay yourself regardless. But as I understand it you can make such owner draws and properly record them as reducing the equity of your company even in non single member companies. But yes, even in the case of a single member LLC simply mixing personal and business funds can apparently lose you any protection from the LLC and even if done properly LLC’s protection is also not absolute. So again, not an expert under what circumstances your personal assets or other businesses can be put at risk.

You can withdraw fund based on the stipulated company charter. Owners of company cannot withdraw funds anytime they want. Happy to be corrected tho. LLC is a completely different discussion.