To incorporate or not.

[Farrell]

>  If you, and your wife, are the only stock holders of the 
> corporation, and the corporation gets sued, guess who has to pay?

I think it is clear that to be sure here one would need to seek competent legal council. But my general understanding is that is a piano tuner's corporation got successfully sued for $100 million - assuming the business was worth less than $100 million (I know mine is), the affected party could only collect what the business was worth (not the $99 million estate that my great auntie left me). 

The affected party could not dig into my personal pockets. That was my clear understanding from my attorney when I had my S-corp for environmental services. It wouldn't be all too difficult to make one small mistake in that business and end up with a multi-million dollar groundwater cleanup bill. My info was they could sue my business and take everything the business owned, but they could not touch my personal assets.

Terry Farrell
  
----- Original Message ----- 
From: <Wimblees@aol.com>
To: <pianotech@ptg.org>
Sent: Sunday, April 27, 2003 6:36 PM
Subject: Re: To incorporate or not.


> In a message dated 4/27/03 4:32:16 PM Central Daylight Time, 
> mfarrel2@tampabay.rr.com writes:
> 
> > Basically, if you are on the up-and-up and trying to do the best you can and 
> > something goes wrong - you are protected from personal lawsuits if you are 
> > working for a corporation.
> > 
> > Terry Farrell
> >  
> > 
> It's true that if you're working for a corporation, and the corp. gets sued, 
> the corp. has to pay, and the individual cannot be held liable. In a sense, 
> the stock holders of the corp. pay the bill. If you are a stock holder in a 
> corporation, then you are in a sense paying, by the fact that your dividend 
> might not be as big. If you are the stock holder of a privately held 
> corporation, then the stock holders also have to pay. The stock holders have 
> to take the money either out of the profit of the business, the assets of the 
> business, or, if there are none of those, out of the stock holders pocket. 
> 
> Now we're down to a privately held corp. where just you and your wife are the 
> stock holders. If you, and your wife, are the only stock holders of the 
> corporation, and the corporation gets sued, guess who has to pay? And it 
> doesn't make any difference where the money comes from. The stock holders 
> have to pay. Not only the judgment, if there is any, but also the legal fees. 
> 
> 
> Wim
>