Several business entities are recognized in the United States, such as the sole proprietorship, general partnership, corporation and limited liability company (LLC). Each form of entity has its own strengths and weaknesses. In conjunction with your accountant, who can advise you on what form is best suited for your tax and financial situation, we can discuss these issues with you and help you decide which is best for your business. We will then work with the relevant governmental authorities to handle company formation for your business.
Perhaps one of the most important considerations in entity choice is the limitation of liability. Not all entities limit the liability of its owners. The notorious 1966 case, <em>Walkovszky v. Carlton</em>, best illustrates the significance of limitation of liability to the business owner.
Carlton was the principal stockholder of 10 corporations. Each corporation owned two taxis, and each held the minimum liability insurance then mandated by New York law. Walkovszky, a pedestrian, was hit by a taxi owned by one of the corporations. As the corporation had little assets of its own, Walkovszky sued Carlton directly.
New York’s highest court, recognizing that the very purpose of incorporation was to limit the personal liability of its stockholders, concluded that Carlton could not be held personally liable. As Walkovszky did not state an adequate reason for the courts to disregard the corporate form, he could only reach the minimal assets of the one corporation.
The Carlton case also tells us that a corporation or LLC’s limitation of liability is not absolute. When you form your company with us, we will advise you as to how you can preserve the limitation of liability.
Even though you may not be running a New York taxi business, liability protection is important. It can protect your personal assets from business deals gone wrong or the passerby that slips and falls in front of your store.
If you are thinking of starting a business, or if you have already have a business and want to elevate it to the next level by forming a company, please contact us today. We will be glad to help.