Limiting Liability in a Sole Proprietorship...

[shernandez]

I am thinking of starting an consulting/accounting business as either a sole proprietorship or LLC in California. I understand that the LLC will provide more protection of personal assets, but if I were to choose a sole proprietorship structure for simplicity/cost sake, is there a way to structure the contracts that the entity enters into, such that the liability of the sole proprietorship would be limited based on the contract terms and conditions? I am thinking of something along the lines of limiting the liability by having standard terms and conditions in each contract that limit total liability to the total fees charged in last 12 months, or something along those lines. Thanks for any thoughts.

 

[LdiJ]

I am thinking of starting an consulting/accounting business as either a sole proprietorship or LLC in California. I understand that the LLC will provide more protection of personal assets, but if I were to choose a sole proprietorship structure for simplicity/cost sake, is there a way to structure the contracts that the entity enters into, such that the liability of the sole proprietorship would be limited based on the contract terms and conditions? I am thinking of something along the lines of limiting the liability by having standard terms and conditions in each contract that limit total liability to the total fees charged in last 12 months, or something along those lines. Thanks for any thoughts.

Honestly? The best way to protect yourself from liability is to have a good business liability insurance policy. It doesn't matter what kind of business entity you choose, when you are a small business the "corporate veil" can often be pierced. A good liability policy is the best protection.

 

[davew128]

In the State of California, an LLC cannot be used to perform personal services which require state licensing, such a public accounting.

 

[PaulMass]

A corp, LLC, LLP, or other liability limiting entity, cannot protect you from your own negligence. If you are the only person doing the consulting, an injured party can sue both the corp and you, personally.

The main purpose of a corp is to protect you from the negligence of someone else, like an employee, partner, or supplier.