WHO ARE YOU DEALING WITH?
Most companies of any size will form corporations, and even very small companies, sole proprietorships with no employees, will form a Limited Liability Corporation (LLC), to protect the owners from personal liability.
WHAT IS A CORPORATION?
A corporation is a business entity that protects the owners of the company from being individually sued due to operations of the company. Each state has its own rules for forming a corporation, which usually involves filing requirements, fees, and annual reports. You can tell if a company is a corporation if it has the suffix’s “Corporation, Corp, Incorporated, or Inc.” in its formal title.
John and Paul set up a corporation called “Basic Advertising Development (BAD), Inc. BAD enters into a 5 year lease for office space. For 3 years, business is great, John and Paul make good profits, which they pay themselves a handsome salary. In year 4 business dries up, and not enough income comes in to pay the rent and utilities. The landlord sues for back rent. Because the lease was in BAD’s name, not John and Paul, the landlord can only sue BAD. John and Paul have already gotten their money out of the business, and can’t be financially touched by the lawsuit.
WHAT IS A LIMITED LIABILITY CORPORATION (LLC)?
A Limited Liability Corporation (LLC) is a type of corporation that is particularly advantageous for small companies.
An LLC is a simplified form of corporation, with less paperwork, and a simpler tax structure. LLC’s typically have only one or a few owners, and may have a few or even no employees at all (an owner who receives profits, but not a regular salary is not considered an employee). You can tell if a company is an LLC if it has “LLC” in its title or letterhead.
WHY IS THIS IMPORTANT?
What this means, that if you are a consumer, and things go south in a business relationship, the individual person you are dealing with (tradesman, car salesperson, landlord) is not the party you can seek recourse (Justice?) against for any bad acts, such as misrepresentation, deceptive trade practices, breach of contract, or breach of warranty.
WHAT CAN YOU DO?
If you are going to give your money to anyone, don’t take anything at face value. Be skeptical of anything that is said. Think about who has been telling you, “You’ll love it, it’s going to be great.” for the last four years? Human nature wants the easy way out. Most of us are impatient, don’t want to think, or do the difficult work. Take your time, check out reviews, references, and don’t make a decision till you get multiple offers. It’s hard in the short term, but the best insurance against suffering financial loss in a business transaction are the words, “Thanks for the offer, let me think about it.”
If you are contemplating entering into a business relationship or making a large purchase with a long term financial commitment, contact the Law Office of Elliott Klein, PLLC, for a review of the proposal and documents you are being asked to sign.