QUESTION
Is an LLC really worth forming for a single owner?
Asked on Jun 16th, 2014 on Business Law - Mississippi
More details to this question:
I work a part-time (second) job as a forester and land surveyor. Most of the time, I work completely by myself but occasionally hire additional help on a day-by-day basis for activities such as prescribed burning/cutting lines. I am considering forming an LLC primarily for liability protection. I have heard that liability protection passes through the corporate veil if an owner made the mistake. Since prescribed burning is high risk and the threat of being sued over property disputes, would I be any better off forming an LLC compared to just maintaining insurance on myself?
1 ANSWER
I'm not sure what you mean by "liability protection passes through the corporate veil if an owner made the mistake", but if I understand you correctly, it depends on what kind of mistake you mean. Individuals are personally liable for their torts (negligence, malpractice, fraud, libel, etc.), so that if you slander someone, you will be personally liable regardless of whether you did it in the course and scope of your duties as an employee of the llc. Individuals, however, are not personally liable for the contractual obligations of the entities they own. For example, if you form an llc and operate it properly (observe the distinction between the corporation or llc and yourself, individually, for example don't commingle funds), you would not be personally liable on the llc's lease, a purchase order for equipment, or any other contract of the llc (unless you personally guarantee it.) If you've got a lot of personal assets to protect, it makes sense to form an llc or corporation for the extra protection it gives you. The expenses for doing so should not be that large.
Answered on Jun 16th, 2014 at 5:32 PM