Swimming Lesson LLC?

[amercnite]

Arizona

My wife teaches swim lessons for 6 weeks every year. She has never been LLC'd. I was recently told that any assets that we have can be at risk if we were sued. She has all the parents sign a liability waiver, but would that hold up in court? Is it worth it to get LLC'd? I have read that an LLC may not even protect our personal assets. I need HELP!!! If an LLC will help protect us in the event of an accident then I believe it's worth it. She has Insurance on the pool and they know she teaches swim lessons....Thanks for your help!!!!

 

[Brian Belamy]

Is the swimming pool yours (on your property or on the same property as your home) or is it at a different location and owned by a third party?

 

[amercnite]

Arizona

She teaches swimming lessons out of a pool at her mother's home. It is on her property attached to her house. So it is owned by a third party. Her mother has insurance that covers the pool, and the company knows how many children they teach. I just wasn't sure if that was enough. Thanks again for your help!!

 

[Brian Belamy]

This reply assumes Arizona provides for LLCs and that its LLC law is not significantly different from the average state.

You are correct in assuming that your wife or the owner of the pool could be liable in tort.

Whether or not a particular liability waiver is enforceable or not depends largely on the language in the waiver and the circumstances involving its signing. Thus, it might be effective against one person and not another. The issue is basically one of contract law. There are many ways a waiver of liability could be invalid (one way you recognized - signature by a minor only). It is not feasible to give you specific advice on the strength of your liability waiver without knowing the language and the individual facts surrounding each signing. Usually, general waivers can be circumvented by a plaintiff; thus, having a lawyer draft one for your wife's lessons/business is recommended.

Assuming for the purposes of your question that your wife's liability waiver is inadequate, incorporating your wife's swimming lesson business as a Limited Liability Corporation (LLC) would - generally - provide greater protection. The general rule regarding LLC liability in regards to personal liability is that your wife would be liable in damages only to the extent of the LLC's assets. The only negative to forming an LLC would be the initial procedural costs and annual filing fees. In most states an LLC does not have the double taxation of a normal corporation.

However, an LLC's limited liability is not absolute. The corporate veil can be pierced (your wife can be personally liable). The most common ways to pierce the corporate veil are: (1) alter ego (such as commingling personal funds); (2) not observing corporate formalities; (3) the LLC is thinly capitalized; and (4) fraud.

Your attorney would best be able to inform you how to form and operate an LLC without losing its liability protection.

Note, nothing will protect your wife from personal liability for intentional torts.

Finally, your wife could obtain her own liability insurance, but I'm assuming that would be cost prohibitive.

Hope This Helped,

Brian