QUESTION
I want to know if having two separate companies a transportation company and the errand business will reduce liability surrounding car accidents.
Asked on Apr 09th, 2015 on Business Law - Florida
More details to this question:
Hello, my husband and I are in the process of setting up a new errand business and looking for small business formulation services. We specifically want to know if having two separate companies a transportation company and the errand business will reduce liability surrounding car accidents. In one of the errand business setup guides we read it stated to make sure you had your vehicles and drivers under a separate transportation company because in the event of a law suite, the only assets at risk belongs to the transportation company and they would not be able to go after assets belonging to the errand business. Is this good advice or is there a better way to mitigate liability surrounding car accidents.
1 ANSWER
As a general rule, shareholders are not personally liable for the obligations of their corporations, and llc members are not personally liable for the obligations of their llc's. This is the main reason that people incorporate or form llc's. Thus, you can limit your exposure for motor vehicle accidents by forming a separate corporation to own and operate the errand business, and buying the lowest insurance allowable under the law. If there is an accident, only the assets of the transportation corporation (which you will keep minimal) will be at risk, and you can insulate the assets of the errand company and your own personal assets. However, you have to be careful to run all the corporations separately, both from your other corporations and your own personal transactions, and to observe the proper formalities, so that no claimant is able to "pierce the corporate veil" and you remain shiielded from personal liability. For example, the transportation corporation must actually own and run the cars, and employ the drivers, and should bill and collect from the errand corporation for its transportation services.
Answered on Apr 10th, 2015 at 8:07 AM