Advanced Marketing Forum Question

LLC vs S Corp

Question:
I am working with a prospective client, age 57, who runs an asbestos abatement business in central Maine. His business is organized as an S-Corporation. He has been told that a Limited Liability Company (LLC) would provide better protection from potential lawsuits for his personal/family assets but I have thus far been unable to verify this. He has five full-time employees and he works "hands on" in the business himself. His gross receipts last year amounted to around $500K and his AGI was around $250K. Would changing form an S-Corp to an LLC improve his situation?

Reply:
I do not think he gains much if anything from a protection point of view by switching to an LLC. That said, this is really a legal decision, which you may wish to review with the client’s attorney or an attorney you know. Above all, you want to avoid offering any opinion on this subject other than he might want to get a second opinion from one or more attorneys on this issue.

Moreover, in my years of law practice, the general consensus was that insurance was a much better vehicle to afford protection than corporate form for organizing the business.

And there are more aggressive strategies for asset protection if that is really your client’s concern.

I’d be glad to discuss further with you if you care to call.

Barry L. Kohler, JD, CFP, CLU BDMP
Wealth Management
100 Middle Street
Portland, ME 04101-1100
Phone: (207) 541-2307
Fax: (207) 541-2353
E-mail: bkohler@bdmp.com

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