"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote:

- quote -

You seem to be asking if the individual is "judgment proof,"
whereby assets are not reachable, would I say insurance is
unnecessary. My answer would not change. While I only
practice state-level law in California, I can assure you in
all common law jurisdictions there exist mechanisms by which
judgment creditors may reach the income of a going business.
Any attempt to hide this income would be a crime on several
levels. Many states actually have a sheriff's officer,
called a keeper, collecting money as it comes in. In
addition, if there were an adverse judgment against a
professional, there would probably be levys against future
assets acquired, and the $25,000 account could be taken.
There is no way insurance premiums would not be cheaper than
this collective risk.

Timothy E Kelly, Esq.
Certified Specialist, Taxation Law
State Bar of California
Board of Legal Specialization

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Tim[at]timkelly.com (Timothy E. Kelly, Esq.) wrote:

- quote -

Would your answer change if:

The professional were self-employed, no corporation, no
liability insurance and no money or property except for a
retirement plan (exempt from creditors in his state) and a
business account with average balance of $25,000)?

(Spouse is fairly well off, but she has no connection to
business other than marriage. Not in community property
state. Professional has general power of attorney over
spouse's assets and they do file jointly.)

-HW "Skip" Weldon
Columbia, SC

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Gary Goodman <gXgoodmanX[at]nyc.rr.com> wrote:
- quote -

Sometimes lawyers forget about things that, if they
remembered, would result in the client paying them less
money.

- quote -

Here in California both corporations and LLC's are required
to pay a minimum tax of $800 per year. I tell people that,
given the choice between paying that tax or paying the same
money for insurance premiums, it's generally better (that
is, better protection) to go for the insurance.

Stu

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Gary Goodman <gXgoodmanX[at]nyc.rr.com> wrote:
- quote -

In virtually every law school, Torts is a first year
subject, In almost every Torts class, negligence and its
elements are taught first. In addition, corporations or
business law is another required subject. If your client the
lawyer has forgotten such fundamental tenets of law (and
notice how all the other non-lawyer tax pros who answered
you were completely aware of this issue)perhaps he should
think twice about going solo. He should also be aware a
SMLLC will provide virtually no creditor protection for any
assets in the LLC because the protection of an LLC relies
upon the ability of other LLC members to prevent a new
member (a judgment creditor) from joining.

He needs lots of insurance and it isn't cheap.

Timothy E Kelly, Esq.
Certified Specialist, Taxation Law
State Bar of California
Board of Legal Specialization

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- quote -

I think you answered your own question. If they don't know,
they can't very well tell their clients.

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tim[at]timkelly.com says...
- quote -

That said, why don't lawyers tell their clients this? We
even have a client who is leaving his large law firm to set
up his own practice and he is convinced that a SMLLC will
protect his substantial personal assets.

Gary

--
You can probably X figure out X which letters to X delete to
derive my email address X.

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Gary Goodman <gXgoodmanX[at]nyc.rr.com> wrote:

- quote -

Answering this question doesn't require a law degree, as any
tax professional on this forum can tell you. A SMLLC implies
the CPA has no partners who are also licensed. At the most
there might be employees but the sole CPA is ultimately
responsible for what is produced.

"Piercing the veil" is not even an issue. There is no
structure of any kind which may protect you from your own
negligence, because you would be personally named as a
defendant along with whatever entity you operate through.
The LLC or S-Corp will protect you from negligent acts of
employees (again, where you are not also personally
responsible, such as an auto accident involving a company
vehicle) and those of other partners. A multi-member LLC or
S-Corp will generally also protect you from creditors who
want to reach your personal assets based upon a judgment
against the entity which does not include you personally.

Defense against your own negligence is through adequate
professional insurance.

Timothy E Kelly, Esq.
Certified Specialist, Taxation Law
State Bar of California
Board of Legal Specialization

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"Gary Goodman" <gXgoodmanX[at]nyc.rr.com> wrote

- quote -

That's because you can't protect yourself from your own acts.

The LLC is great for protecting yourself from the acts of
~others~, and that's why it's a great tool for multi owner
professional firms.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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Gary Goodman <gXgoodmanX[at]nyc.rr.com> wrote:

- quote -

It's not an issue of piercing the corporate veil. The
problem is that you can't limit liability for your own
personal [alleged] screwups. For professional purposes you
would use a corporation or LLC (in addition to any tax
benefits that may come along) to limit your liability for
the acts of your partners, and possibly employees.

Stu

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"Gary Goodman" <gXgoodmanX[at]nyc.rr.com> wrote:

- quote -

No professional can avoid liability for his own mistakes or
malpractice. Professional corporations and LLCs, whether
single member or not, don't change this. What these
organizations do offer is avoidance of personal liability
for mistakes of other members of the organization, if you
don't supervise them or otherwise participate in the
engagement for which the liability is asserted. If you make
a mistake, the injured party can come after your personal
assets; if your partner makes a mistake, the injured party
can come after the corporate assets but not you personally.

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I keep reading about how to organize an
accounting/law/financial planning business and wonder if
there is something missing. I'm not a lawyer, but I seem to
recall that the corporate veil is easily pierced in the case
of personal services. That is, a CPA who has a SMLLC, gets
no help from the corporate structure if sued for a mistake
like missing a large, material liability in an audit.

Any lawyers want to comment?

--
You can probably X figure out X which letters to X delete to
derive my email address X.

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