Question: You have been approached by a close family friend who is putting together a limited liability company to purchase a condominium complex near Cocoa Beach in Florida. He is asking you along with a number of family members to each invest $10,000 in his company. The condominium complex is for sale for $5 million.
Your friend hopes to convince 50 people to invest $10,000 each, which will raise $500,000; he intends to borrow the remaining $4.5 million to close the deal. "I don't mind investing the $10,000 but I'm really nervous about being on the hook for a $4.5 million loan if the deal goes bad," you note to your friend. In response, he insists that all you would have at risk is $10,000 and that you would not be liable for anything else. Is your friend right or wrong about this?