Are You Incorporated?

[TractorLegend]

Our auto shop is incorporated as an S corp. in Washington state. I don't remember why our accountant recommended that route but we trust him as a good one... we also own our building and its titled to yet another entity of ours- Marlisco Properties, and leased to Mark's Expert Auto Service, inc.
Any layer of protection is good i think and is yes, a sad testament to law suit happy Americans.
I think not having the property in your direct name, and in another corporate name can legally have some benefit as a layer of protection. I checked with a couple attorneys at the time as the idea was mine, and neither could agree nor disagree there was or wasn't a benefit. So I erred on the side of caution.
We are also in the process of installing a video/ audio monitoring and recording system at the shop to help reduce crime and record customer interaction at the front counter. Even though work orders are signed and jobs are well explained in advance by one experienced individual, one in a thousand troublesome folk will pull the "you never told me that" scenario and it will be priceless to have the ability to show them what exactly was spoken and agreed to. Also there's so many of those "fall down artists" lurking about looking to collect.

 

[2nstonge]

We rent out a few bays in our barn for storing vehicles, boats, campers, etc, during the winter. I also have a home improvement biz that I run out of the barn. Our lawyer and accountant recommended an LLC, so we went with that. We have anyone storing a vehicle sign a lease and there's a fairly lengthy paragraph about us not being responsible for damage to the vehicle, injuries while on the property, etc. The lawyer was very clear that if someone is bent on suing you, they will, and LLC is just one more layer to cut through. Any attorney worth their license can easily follow the papertrail if under the LLC you lease the property to the another entity that's controlled by you or family member...it can get cumbersome and expensive to create all these shells. And the bottom line is none of these entities are bullet proof.

-Norm

 

[TractorLegend]

I suppose were banking on having decent judges to throw out frivolous suits...i.e. a reasonably prudent person sort of doctrine. If someone signs paperwork saying not responsible for damages, it should hold up.
Conversely if they signed that paperwork and you purposefully ran them over with say a lawnmower for no just cause the reasonably prudent doctrine should see there is cause for claim even if they signed papers. (my opinion)
Also, and I believe this is very important: If you represent yourself as a corporation be sure ALL of your advertisements, letterhead, signs, rubber stamps, etc say INC. and you sign all your materials with your position (president, v.p, etc) or an argument can be made you materrialy participate and do not represent yourself as a corp. in a possible litigation.

 

[EarPlug]

A LLC may not work since you are really dealing with a personal property issue. An LLC provides many protections but not all.

A BIG exception is when the owner treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity. (excerpt from the following web site)
NOLO Law

 

[jpm]

One other possible pitfall of incorporation is the americans with disabilities act The lastest scam is to claim you are not complaint BUT for $20,000.00 to ? they will forget about it or else they will report you to the feds. Just something to think about

 

[midlf]

This is where you have your shark, oops I mean attorney, send them a letter informing them that you will be turning them into the local and federal authorities for extortion and fraud and with copies to said authorities. The best defense is a good offense.

 

[SnowRidge]

If we are talking about the farm here, that is, a hunk of land with the house that you live in located on it, what happens to your IRS capital gains exemptions should you sell and make a profit? Does incorporating negate that?

 

[cowboydoc]

<font color="green"> The lawyer was very clear that if someone is bent on suing you, they will, and LLC is just one more layer to cut through. Any attorney worth their license can easily follow the papertrail if under the LLC you lease the property to the another entity that's controlled by you or family member... </font>

LLC or other corporation can be it's own entity. BUT it takes alot of legal wrangling to do that. And you can still lose the place. Bascially what the LLC does is give you an option. BUT in order to absolve yourself of liability you would have to put the land in the LLC's name. By having the LLC still in your name it provides you very little liability protection. As long as YOU own the property YOU are ultimately responsible regardless of what entity is leasing it.

As an example let's say that you lease out an apartment through an LLC. Let's say someone gets hurt because the sidewalk was cracked and they tripped and broke their hip. The woman dies and the son sues the LLC. They sue for 4 milllion, LLC only has 1 million of liability insurance. Next they go to the owner of the buidling, you, and sue for the remaining 3 million. You fight it but it matters little because ultimately you are the owner. Judge awards the 3 million, you lose the apartment building and luckily you had personal liablity insurance that picked up the rest. That is a true story!

Now the way you could have gotten out of that scenario was if the the LLC owned the apartment building. In this case they can't touch you personally, but they could sue for all of the assets of the corporation which would have included the apartment building but at least you would not have been sued personally.

Same case with land. Our ranch is owned by the corporation. Liability wise if I am ever sued they can't touch me personally. But I could lose the ranch. Unfortunately can't have it both ways. /forums/images/graemlins/frown.gif

 

[KentT]

</font><font color="blue" class="small">( <font color="green">
Same case with land. Our ranch is owned by the corporation. Liability wise if I am ever sued they can't touch me personally. But I could lose the ranch. Unfortunately can't have it both ways. /forums/images/graemlins/frown.gif )</font>

Exactly. Should the website (LLC) get sued because someone gets maimed or killed doing something with one of the old tractors described on my site, they couldn't take my house, my savings, etc. -- only the assets of the LLC itself...

The LLC provides a level of "insurance" for my personal assets in this case because the LLC doesn't own my house, I do....

 

[hunterridgefarm]

Man this could get confusing...

I am setting up an appointment with an attorney in a couple of weeks on another matter (right-of-way to a land locked piece of property) and will talk with them about this.