Incorporation? (LLC or S Corp.)

[maca]

I've had my research and consulting business as a sole proprietor for six years. I have a couple of employees. I'll be the only member or shareholder now, but may take on a partner in the future.

I've been debating
1) Whether I should get incorporated.
2) If so, LLC or S Corp.

I asked more than one accountant whether I should get incorporated. They all say I shouldn't because being a consultant, I would not escape liability even if I get incorporated. They say even if I grossed $500,000 a year, incorporation won't be worth the added expenses and paperwork. Getting appropriate insurances may be an answer for a consultant. So they say.

I would appreciate advice from a legal perspective.

Thanks in advance,
MA in Calif.

 

[ALawyer]

First, corporations really can serve as shields from many types of liability, but not all. How effective the shield would be really depends on how carefully you plan and operate your business, and whether you are careful to get contracts that are in the name of the corporation, rather than you individually.

There are at least 2 sources of liability -- what you do personally and what your employees do. Now you are clearly liable for both. For example - If an employee goes out to pick up the mail for the business and runs down someone, YOU are now personally liable. (That has nothing to do with the actual consulting.) And yes, you should get insurance anyway but insurance doesn't cover everything and may be inadequate.

Subchapter S usually makes sense if there is just one shareholder.


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This is intended as general information only and NOT LEGAL ADVICE. You are not my client, and I have no obligation of any kind to you. To retain a lawyer, go to http://AttorneyPages.com

 

[maca]

ALawyer, thanks!

MA