One of the most troubling tendencies we see as attorneys is the large number of small and medium-sized businesses that still operate as a sole proprietor or general partnership.
Often clients come to our firm for their estate planning needs. We spend a good deal of time and money ensuring that what they have worked so hard to earn goes to their children and not to the Government.
However, if these clients are business owners who have not taken the time to incorporate their business, they need to be afraid of another potential outcome:
Leaving their life’s work to a plaintiff in a lawsuit.
One of the sad truths about life in modern America is that a person can be sued for just about anything, by just about anyone.
Lawsuits that would have been tossed out of court only a generation ago are now proceeding to a jury trial—and winning!
Even more common than those who play litigation roulette are those who practice what we call “settlement extortion.”
These potential plaintiffs know two things:
1. Their case has very little chance of succeeding at trial, and
2. You would rather settle with them rather than fight it out in court over the next few months or even years.
Their whole strategy is not to actually let their case be decided on its merits—but to force you into settling with them out of court to avoid costly litigation.
It is now “open-season” on small business owners.
Happily, there are steps that you can take to protect your family and your life’s work.
Even better, you can protect your assets for a very reasonable cost.
By incorporating your business (either as a corporation or a limited liability company), and by carefully observing the legal formalities, you can limit your loss to what you have invested in the company, instead of having your personal assets on the line.
We encourage every business owner to give strong consideration to incorporating their business. We can see no upside to not incorporating your business, but losing all of your personal savings and belongings is a terrible downside.
Chances are, you already spend money for business insurance of one form or another.
You can think of Incorporating your business a “Sleep Insurance”—that may help you sleep at night should you ever become a target of one of these vicious lawsuits.