How court weighs new formed LLC in medical malpractice suit

[MoeJ]

I have recently formed an LLC in Illinois with a business partner entering a medical malpractice suit.

Plans were made for him to be a minority interest holder in the company. He now is holding out on signing an operating agreement for reasons of wanting to show him as a 50% owner of a company for leverage towards potential "loss of income, well-being, etc."

Note that this company is newly formed. No contracts for salary or payroll have ever been signed on paid out. Though there is future potential growth in the company, currently there are no sales or company history to show. All we have is some inventory.

In the end, my question is whether a court gives consideration to a newly formed company in medical malpractice suits? Is there a benefit to the outcome of any settlement or judgement because you are show you are a member of an LLC?

Thanks for your help

 

[justalayman]

In the end, my question is whether a court gives consideration to a newly formed company in medical malpractice suits?

]that makes no sense. What consideration are you suggesting might come into play here?

if the suit is pre-existing, the LLC would not be involved in a suit. If you mean can he somehow protect his income or assets by hiding behind an LLC for a possible award from a malpractice suit; that all depends how everything is put together. Generally, he cannot protect HIS income or assets but the assets of the LLC would not typically be subject to a source of funds to pay a judgment the doctor is liable for.

If he now attempts to shield funds or assets by transferring them to the LLC, well, that what is done for the sole purpose to hide and protect an asset can often be undone. Beyond that, his interest (ownership) of the LLC is a personal asset to him and as such, subject to be considered a source of funds to pay a judgment. In a situation such as that, not only will his interest be affected, it can have a very negative result on the LLC itself. Basically, if he is a 50% shareholder, if the court allows a seizure of his 50% share or allows for a forced sale to liquidate his share, I suspect it could be a deadly blow to the LLC.

 

[Mass_Shyster]

I got the impression it was the plaintiff in the malpractice suit forming the LLC, and is planning to use the lack of income from the LLC as evidence of lost wages.

 

[justalayman]

I got the impression it was the plaintiff in the malpractice suit forming the LLC, and is planning to use the lack of income from the LLC as evidence of lost wages.

Ok, I guess that could be too.



Then, I guess it is a simple: no.

Choosing to not have an income is not the same as a loss attributable to whatever issue is the basis for the suit. A loss is the inability to earn an income due to the injury. In reality, it really doesn't make any difference if one currently has an income or not but whether they can or cannot earn an income as they had been due to the malpractice.

it's like this:

If I am a professional runner and the doctors actions cause me to lose my leg, the supportable projected income due to the loss of my leg is the basis for my claim for loss of income. Those are what my losses are. Whether I am currently gainfully employed or not does not change what my losses attributable to the injury are. It might mean I am a poor businessman but that are not losses attributable to the injury.

 

[latigo]

]that makes no sense. What consideration are you suggesting might come into play here?

if the suit is pre-existing, the LLC would not be involved in a suit. If you mean can he somehow protect his income or assets by hiding behind an LLC for a possible award from a malpractice suit; that all depends how everything is put together. Generally, he cannot protect HIS income or assets but the assets of the LLC would not typically be subject to a source of funds to pay a judgment the doctor is liable for.

If he now attempts to shield funds or assets by transferring them to the LLC, well, that what is done for the sole purpose to hide and protect an asset can often be undone. Beyond that, his interest (ownership) of the LLC is a personal asset to him and as such, subject to be considered a source of funds to pay a judgment. In a situation such as that, not only will his interest be affected, it can have a very negative result on the LLC itself. Basically, if he is a 50% shareholder, if the court allows a seizure of his 50% share or allows for a forced sale to liquidate his share, I suspect it could be a deadly blow to the LLC.

You know what they say about some doctors. Blindfolded they can find their way around the inside of a human torso, but they need help finding the cafeteria.

It wouldn’t surprise me if this LLC is a DIY.
_____________

Regarding this so-called protection of the OP’s income and capital contribution he may wish to have his attorney explain Illinois’ laws on transfers in fraud of creditors and the rights of creditors set forth at 805 ILCS 180/30-20 (Illinois’s Limited Liability Company Act) with respect to foreclosing judgment liens upon an LLC member’s distributive share and charging orders.

 

[MoeJ]

Okay, the LLC as a tax haven or using it to hide money isn't where I was going with this.

Maybe I can give some more info

Here is the theoretical - (in chronological order)

Say you enter the hospital for some routine outpatient surgery after several CT scans and tests are performed.
Say that during these tests a technician documents that there is area of interest that should be further evaluated.
Say that outpatient surgery is performed and he is sent on his way with a bill in hand, with no mention that further testing has been recommended.
Say you start a business.
Eight months after starting said business the pain is back and you seek medical help, whereupon they reveal the 14 month old technician's documents recommending further testing/scanning and unfortunately reveal that the small spots the prior technician was trying to flag are now massive stage IV cancers on full rampage throughout the body of disregarded patient
Say because of this potential malpractice you spend the next 4 months in a hospital from cancer surgery
Say a law firm is licking their chops when they find out about such negligence on disregarding technicians recommendations

Say you're now in court

Is there a benefit in court to show that you are a "Member" of an LLC - an LLC formed prior to the revelation of the hospital (potentially) totally screwing their patient over - in hopes of maximizing the future potential loss of income?
I use "future potential loss of income" because currently this person is not on salary nor is guaranteed any returns or disbursements but is in fact entitled, because of his 50% stake of the LLC, to potential disbursements or potential salary in the future after time is given for said LLC to grow.

Can they find value in the LLC? i.e. can the court rule that this company, had the plaintiff not experience subjected malpractice, would be worth $700,000 after year one and experience 15% growth in year two, etc???


I'd imagine they are going to argue that his lifespan has been shortened by this negligence and that he won't be able to partake in his 50% disbursements when potential disbursements are made. Perhaps they will argue that the companies growth potential was greatly reduced because of his extended hospital stay and life living with advanced cancer.

I completely understand the notion of "loss of income." But how does it weigh out in court when the future outlook of the company you are a half owner of is, for the sake of argument, unknown?

 

[MoeJ]

@stevef - you're kinda right. Though when the biz was formed this person was a healthy human being and even the notion of his current state was the furthest thing from our minds when we planned the business.

 

[tranquility]

Damages must be proven to be reasonably certain. Membership in a start-up LLC will not help that in any way I see.

 

[justalayman]

Say because of this potential malpractice you spend the next 4 months in a hospital from cancer surgery

and the result is? That is very important in the outcome of the situation.

Is there a benefit in court to show that you are a "Member" of an LLC - an LLC formed prior to the revelation of the hospital (potentially) totally screwing their patient over - in hopes of maximizing the future potential loss of income?

Sure. there is a benefit to the defendant. While it sounds cruel, if a homeless person dies, their loss of income is minimal. If Bill Gates dies, the loss of income is huge. A person not showing an ability to have an income has no losses.

I use "future potential loss of income" because currently this person is not on salary nor is guaranteed any returns or disbursements but is in fact entitled, because of his 50% stake of the LLC, to potential disbursements or potential salary in the future after time is given for said LLC to grow.

potential income? and that is proven by what? Potential disbursements; and that determinable value is what?

and of course, everybody that starts a business thinks it will be the next GE but in reality, an extremely high percentage of start ups fail in a very short period.

. can the court rule that this company, had the plaintiff not experience subjected malpractice, would be worth $700,000 after year one and experience 15% growth in year two, etc???

The court cannot rule that the company will do anything regarding earnings. It could enter a finding though. The plaintiff would have to prove that in order for the court to find that and that is not a provable claim. If it was, everybody would be doing it.

Can they find value in the LLC?

if the plaintiff leaves it on the stand. Can they find future value? no.

But how does it weigh out in court when the future outlook of the company you are a half owner of is, for the sake of argument, unknown?

since your friend is the plaintiff, he must prove his claim. You don't get to simply make allegations and claims based on assumptions. Failure to prove a loss of income means he has not lost any income.

 

[MoeJ]

I completely understand the notion of "loss of income." But how does it weigh out in court when the future outlook of the company you are a half owner of is, for the sake of argument, unknown?

Does the court take potential growth of a company into consideration for potential source of earnings or wealth?
or
Does the court say, "you got screwed, the hospital made a mistake, they are going to pay and they won't have to admit fault. We don't care about your awesome iphone cartoon app that you and your idiot college buddies made or the potential awesome earnings they might make. Amounts will be paid in correlation to the mistake made."

 

[justalayman]

MoeJ;3085170]Does the court take potential growth of a company into consideration for potential source of earnings or wealth?
or

po·ten·tial   [puh-ten-shuhl] Show IPA
adjective
1.
possible, as opposed to actual.

you don't get could be's or maybe's.

Amounts will be paid in correlation to the mistake made."

No. Amounts will be paid in correlation with provable damages.

 

[MoeJ]

and the result is? That is very important in the outcome of the situation.

Still has cancer, was unable to work while in hospital, and currently is pretty damn weak to do much other than make a few phone calls and send a few emails. on a good day he can take a walk around the neighborhood.

There's no doubt from my perspective that if he was as healthy as he was when we formed the biz we would have been greatly more productive during these past several months.

Unfortunately, I am in a place where I will want to purchase his shares when the time comes. A portion of shares lesser than 50%. I don't want that to be the situation but he believes he may be able to use it at leverage when terms of "income loss" and wealth are discussed during the proceedings.

Thanks for your advise

 

[Zigner]

Still has cancer, was unable to work while in hospital, and currently is pretty damn weak to do much other than make a few phone calls and send a few emails. on a good day he can take a walk around the neighborhood.

There's no doubt from my perspective that if he was as healthy as he was when we formed the biz we would have been greatly more productive during these past several months.

Unfortunately, I am in a place where I will want to purchase his shares when the time comes. A portion of shares lesser than 50%. I don't want that to be the situation but he believes he may be able to use it at leverage when terms of "income loss" and wealth are discussed during the proceedings.

Thanks for your advise

So, you're trying to defraud the other party.

 

[justalayman]

Still has cancer, was unable to work while in hospital, and currently is pretty damn weak to do much other than make a few phone calls and send a few emails. on a good day he can take a walk around the neighborhood.

There's no doubt from my perspective that if he was as healthy as he was when we formed the biz we would have been greatly more productive during these past several months.
e

that does nothing to explain the outcome, or more properly, prognosis. A temporary issue only causes temporary losses. Since you have not said or even suggested what the prognosis is, there is nothing to suggest he would even have a claim of future losses (which, yes, are a possibility but they require support which a new LLC with absolutely no track record just isn't going to do). So far, we have a loss of income for 4 months. That's it.

 

[tranquility]

What is the reasonable basis for profit on a new business? It is speculation at best. There must be, as I said, damages must be reasonably certain. For why the OP should stop thinking, see also:

http://classweb.gmu.edu/mkrauss/damages-income.html
It will show why explaining more is just silly.

For a CA specific article explaining the problem:
http://www.rjo.com/PDF/FutureLostProfitDamages.pdf

http://www.journalofaccountancy.com/issues/2002/jan/modelinganddiscountingfuturedamages

http://www.klgates.com/files/Publication/39d4c1a2-cb05-46b3-936f-3c35bb580381/Presentation/PublicationAttachment/dbb2d78b-008b-41c3-8530-3f4b4c61e503/Proving_and_Defending_Lost-Profits_Claims.pdf