Like doctors, business owners face a very similar concern when it comes to their business assets â€“ lawsuits, creditors, attorneys. The threat of a lawsuit on businesses is a pressing concern for owners. Unfortunately, many owners fail to realize the impact a potential lawsuit can have on their respective business. A large misconception among these owners is that they feel their particular business is immune from any such liability claims, and more importantly they feel personal liability would not be an issue because of the way theyâ€™ve structured their business.
The following is a short checklist of some basic plans, safeguards, or structures that business owners should already have implemented or should look into implementing. If an existing plan is already in place, it is always advised to seek a review and ensure proper coverage is being maintained. Spending some money now could save thousands in the future.
1. Is your company formed under a Limited Liability Company (â€œLLCâ€) or Corporation, which protects you from personal liability? a. If yes, does it have the proper legal documents (Operating Agreement, Bylaws, etc.) 2. If your company requires ownership of multiple assets (building, equipment, other real estate holdings etc), are they segregated from one another or held under one ownership? 3. Does your company carry sufficient liability insurance?
A common overlook on the ownerâ€™s part is ensuring they maintain their corporate protection. Many feel that once an LLC is created, you are automatically entitled to protection from personal liability. However, unless you maintain the corporate status of the LLC or corporation it is very easy to lose that protection. Therefore, it is very important to operate your company as a corporation or LLC so that your personal protection is not removed (the legal term for such is â€œpiercing the corporate veilâ€™). In order to do this, you must observe all corporate formalities, meaning if you have a corporation, you must maintain up-to-date bylaws, conduct meetings, preserve minutes of meetings, etc.
Living in such a litigious society should be a good enough reason to look into an asset protection plan; not just for business owners, but professionals as well (physicians, dentists, etc). It is important to realize that taking such steps after being informed of a lawsuit could be grounds for committing a fraudulent conveyance, thus a criminal action. A â€œfraudulent conveyanceâ€ is when a transfer occurs with the intent to delay, defraud or hinder creditors. Therefore, it is imperative to accomplish these steps, or at the very least to speak with an attorney before any known or potential lawsuits arise.
Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Shariah Estate Planning, Health Care Law, Business Litigation, and Corporate Formations. He can be contacted for any questions related to this article or other areas of law at email@example.com or (517) 381-2663.