Hi, I am Robert Naini, your Spray Foam Advisor, and “The Guy in the Hawaiian Shirt”.
I wear the Hawaiian Shirt as a symbol of freedom and flexibility, something that all business owners should want.
And one of my goals is to help 100 Spray Foam business owners set up their business in a way that gets them freedom and flexibility.
This includes providing spray foam training, education, tips & tricks, business fundamentals and coaching or consulting services.
Last week I talked about different types of businesses, including sole proprietorship, partnership, LLC, S Corp and C Corp. In this video I want to focus in and talk about the legal implications and the responsibilities of each of these different entity types.
Now first and foremost, I am NOT a lawyer so if you want real legal advice make sure you talk to a lawyer for that professional help. I am simply sharing my opinions and the knowledge I have from my experience with my own business.
I personally have owned and run a sole proprietorship, a partnership and Spray Foam Advisor is an LLC; so, I have a little bit of experience related to several different entity types.
Hopefully this will give you some good insight to help when you talk to a lawyer, so you are not starting from square one and you know a little bit about the liability associated with each of these entity types.
Each of these entity types falls into one of two categories from a liability perspective – entities where you are exposed to personal liability and entities where there is no personal liability and exposure.
Sole proprietorship and partnerships expose the owner to personal liability of the actions and activities of the business.
With these business types, anything associated with the company or with the organization falls back on the owners and there is no liability protection. If a judgement is applied to your sole proprietor or partnership company, then that judgement can also be applied to your personal assets and holdings. This means that your personal bank accounts, vehicles, property are all at risk if your company defaults on a judgement.
If your company owns a piece of property, in a sole proprietorship or a partnership, and someone gets hurt on that property, then the company may be liable, and the liability for that injury could extend beyond the company to you personally. The company can be sued, and you personally can be added to the lawsuit; after the company assets are liquidated, if that is not enough to meet any judgement, they can come after your personal assets for an injury that occurs on your business property.
There is a special type of partnership, a limited liability partnership, where the liability is a little bit different. With limited liability partnerships, the general partner, or managing partner, are personally liable and the limited partners have no personal liability beyond their investment in the organization.
Now the other type of business entities, the LLC, the S Corp and the C Corp, establish and create a separate business entity that protects and shields the owner from personal liability.
These entities provide the owners of the company with liability protection, so the company is seen as a separate legal entity for liability purposes.
For example, if you own a piece of property in one of these legal entities that has liability protection and somebody slips, falls and gets hurt they can only sue the company. They can only go after the company assets and what the company owns, if the company cannot cover the entire judgement, they cannot come after your personal assets to resolve the judgement.
From a liability standpoint, you as the owner are not personally liable for what happens in the organization on a day-to-day basis.
Now, this of course is a very general statement, if you commit fraud then you are liable for your personal actions, but the focus of this liability discussion is more about the legal protection provided by creating a separate business entity for your company such as an LLC, S Corp or C Corp.
As I mentioned before, I am not a lawyer, if you need this type of information, if this information is important to you, which I think it is important for you as an organization and I think it is important to you as a business owner, then you should get some legal advice.
If you employ or work with people who are on job sites on a regular basis and one of them get injured while doing business for your company or with your company, your company could be liable for that injury and it most likely would be better for you to have liability protection and for that business to be structured as an LLC, an S Corp or maybe even a C Corp.
Next week we are going to talk about the tax implications of these different business entities and what that means for you.
If you found this video helpful then it would probably be valuable to your friends in the spray foam industry, so help us all out and send it to three or four people that you know.
Additionally, if you have any questions, want info on a specific topic, or want to learn how Spray Foam Advisor might be able to help you or your business, you can email us at [email protected]. This is Robert Naini, your Spray Foam Advisor, and “The Guy in the Hawaiian Shirt”, thanks for checking this out and catch me on some more videos.
