Will incorporating now protect me from threats from before I incorporate?

[csdude55]

My business is several years old, and is a sole proprietorship.

I've recently been threatened by a law firm for a bogus claim that could go to court. I know that I haven't done anything wrong, but of course that doesn't stop them from suing anyway; sadly, I've dealt with lawyers like that before :-(

So far their threats have been in the form of regular letters, so nothing has been filed. It's probably just be a threat to see if I'll give them money to go away.

Jokes on them, I've been living on credit cards since COVID and have no money to give! LOL Which is also why I'm asking here instead of calling an attorney.

The question is, could I incorporate NOW and protect myself from personal liability for what they are claiming to have been done 1+ years ago?

If so, what type of corporation should I set up?

 

[quincy]

My business is several years old, and is a sole proprietorship.

I've recently been threatened by a law firm for a bogus claim that could go to court. I know that I haven't done anything wrong, but of course that doesn't stop them from suing anyway; sadly, I've dealt with lawyers like that before :-(

So far their threats have been in the form of regular letters, so nothing has been filed. It's probably just be a threat to see if I'll give them money to go away.

Jokes on them, I've been living on credit cards since COVID and have no money to give! LOL Which is also why I'm asking here instead of calling an attorney.

The question is, could I incorporate NOW and protect myself from personal liability for what they are claiming to have been done 1+ years ago?

If so, what type of corporation should I set up?

It is too late now to protect yourself from a legal action arising from something that happened over a year ago.

Because these threats are making you aware of your legal vulnerabilities, however, you would be smart to discuss your business with a professional in your area to see which business structure will best shield your personal assets from any lawsuits filed against your business. You should also review with your insurance agent your policies to see if you are adequately covered.

 

[adjusterjack]

The question is, could I incorporate NOW and protect myself from personal liability for what they are claiming to have been done 1+ years ago?

No.

Even incorporating now won't protect you from future acts for which you may be personally liable.

 

[Taxing Matters]

The question is, could I incorporate NOW and protect myself from personal liability for what they are claiming to have been done 1+ years ago?

Incorporating now won't prevent the creditor from suing you and getting a judgment against you since the debt they are claiming is a personal obligation of yours and not a debt of the corporation. The main benefit of a corporation for the owner of small business is that it can shield the owner from debts the corporation owes, with some exceptions. Forming a corporation and transferring assets to it would make your creditors have to take some extra steps to reach the assets. So it might you a little extra time before they grab the assets. Note that if the corporation is not bona fide business but seen by the court as sham then doing this likely wouldn't slow the creditor a whole lot. However, it matters in what state you are located as the laws on when and how a creditor may seize the stock or otherwise get at the corporation's assets for your debts will vary in the details from state to state.

But you might already be protected against claims for most unsecured debts. Your post suggests that you may not have a lot in assets, and every state provides for some amount of assets that you can keep that your creditors cannot reach. The states do that to avoid you ending up completely destitute.

If you provide the state you may get some better answers.

Also, check into what free or low cost legal help may be available in your state. Contacting the state bar association, law schools in your state, organizations that give legal help people who are low in income and assets. There is probably at least a legal aid organization funded by the state bar that might be able to help you.

 

[Taxing Matters]

Also, if you are running up large debts on credit cards that you cannot pay just to get by then sooner or later you'll default on those cards too, with the lenders cutting off your credit and suing you. If you are in a situation where you are unlikely repay what you owe in a reasonable amount of time then I suggest you consider consulting a bankruptcy attorney now for advice on how to best protect the assets you have by smart use of the bankruptcy exemptions and for advice on the timing for filing a bankruptcy petition.

 

[quincy]

Here is an overview of the various business structures with their pros and cons:

https://www.sba.gov/business-guide/launch-your-business/choose-business-structure#:~:text=Corporations offer the strongest protection,is higher than other structures.

 

[csdude55]

Thanks for all of the advice! That's very helpful. I honestly doubt that it goes any further, the firm threatening is well known for being pretty shady. I got the first letter demanding money over 6 months ago, and I think that if they were going to do something then it would have progressed by now. I really think they just send out letters to see who'll reply with a check.

Also, if you are running up large debts on credit cards that you cannot pay just to get by then sooner or later you'll default on those cards too, with the lenders cutting off your credit and suing you. If you are in a situation where you are unlikely repay what you owe in a reasonable amount of time then I suggest you consider consulting a bankruptcy attorney now for advice on how to best protect the assets you have by smart use of the bankruptcy exemptions and for advice on the timing for filing a bankruptcy petition.

I don't want to distract the topic, but business was great before COVID! And it's been picking up this year, but slowly; my old revenue source is gone, so it's almost like starting a new business :-/

I considered bankruptcy in 2021, but I was able to refinance my house and restructure some debt to the point that I think that I'll be OK long enough to survive until revenue comes back like before. I'm not positive, but... I think. Last month I had enough come in to pay the mortgage and essentials, but I still had to put about $400 on credit cards for food. Since 2019, I went from maybe $3000 in credit card debt to about $60,000 now :-O

That means that I don't have the money to hire an attorney to fight these guys, though. Which, of course, is what they're hoping for: that I'll be too scared to fight for myself and can't afford an attorney, so I'll just send them a check.

If it does go to court and I lose, though, then bankruptcy would be the only option. Which would be the same as leaving me destitute, honestly.

 

[csdude55]

You should also review with your insurance agent your policies to see if you are adequately covered.

I don't want to mention my state on the off chance that those shady lawyers find this and somehow use it against me! LOL But I can say that my state doesn't require insurance for my field, which means that I have no business coverage. If I'm sued then they'll be going after me, personally.

If I were to lose then they can't take my house or car, but I'm guessing that they could garnish my business revenue? Which would be the same as bankrupting me at this point.

 

[quincy]

I don't want to mention my state on the off chance that those shady lawyers find this and somehow use it against me! LOL But I can say that my state doesn't require insurance for my field, which means that I have no business coverage. If I'm sued then they'll be going after me, personally.

If I were to lose then they can't take my house or car, but I'm guessing that they could garnish my business revenue? Which would be the same as bankrupting me at this point.

You should seek out legal help from a legal aid clinic in your area. Without knowing your state name, it is not possible to tell you what of your assets can be attached and to what extent.

As a sole proprietor, you are your business. Any debts of your business are also your personal debts and your personal debts are also your business debts. A sole proprietorship is a great easy business structure unless or until you and/or your business are sued.

You should have taken out additional liability insurance when you started your business. Hindsight and all that. I recommend you look into this now, even though additional insurance now won’t help you in the event you are sued over a personal or business matter that previously occurred.

 

[adjusterjack]

I got the first letter demanding money over 6 months ago, and I think that if they were going to do something then it would have progressed by now. I really think they just send out letters to see who'll reply with a check.

The statute of limitations on debts, in most states, averages 4-6 years, some less, some more. They have plenty of time to watch until you appear prosperous and then drop the hammer. You can look up the SOLs for your state on google.

 

[quincy]

You have never really said what this “shady” firm is trying to collect on or how much money is being demanded.

Is this a personal credit card debt, or a business debt owed on material delivered but not fully paid for, or a business job botched or not fully completed, or to cover expenses from a personal injury or accident, or is it perhaps to reimburse the local, state or federal government for a loan or loans taken out based on (what is claimed to be) less-than-honest grounds?

The answer could help determine how best to approach the law firm’s demands and could better determine how likely it is you will be pursued past the letter stage and to a summons and complaint.

 

[adjusterjack]

Options:

Get a copyright lawyer now, to evaluate the risk.

Do nothing, wait until you are sued, if you are sued, then get a lawyer.

Pay.

 

[quincy]

My business is online ... I received a letter ... Not a cease-and-desist, just a demand for money with a threat ... Shortly after, I received more letters for more occurrences. I stopped counting after awhile.

Yup. It looks like your business stepped on a few intellectual property rights and the rights holders are not pleased.

Registered copyrights that are infringed can wind up costing an infringer between $750 and $30,000 per infringed work (or $150,000/work for especially egregious infringement). These are damages set by statute that can be awarded a rights holder in court if his suit is successful.

Notices of infringement and demands for payment are often the first step a rights-holder will take before filing an infringement lawsuit. There is generally some room for negotiation at this stage.

I strongly recommend you take the demand letters you have received to an IP attorney in your area before you are sued. You will want an attorney to personally review your business to determine if you have a good defense to these claims of infringement.

I have removed links from my quote of your post above and have asked the moderator to review your post in its entirety. Your post will be returned to its place in this thread, with or without edits, once the moderator has the chance to review it.

 

[csdude55]

Mods: I'm fine with my previous post being deleted completely, I'd rather not risk them finding it and linking it back to me.

I'm in a tough position where the money simply is not there to hire a copyright attorney... not that there's one within 200 miles of me, anyway. And it really doesn't matter what they're willing to settle for, the money simply is not there!

And I truly can't imagine how I was supposed to have known that the publisher was in the Yahoo feed, much less that they didn't want subscribers to that feed to see their data. It appears to me that every person in the US that uses the Yahoo feed would be open to the same lawsuit. And since I have no way of obtaining a list of all publishers that are in there, how could I possibly contact each of them at this point to make sure it's OK?

It's frustrating because it all seems like nonsense with no legal merit. Their complaint should be with Yahoo publishing their data in the feed, not with the people that use the feed and have no idea that they have a complaint >:-(