If you would like to protect your assets from lawsuit losses there are two simple rules to remember.
Rule # 1. All lawsuits are about money! If there is no money to take in a lawsuit no lawsuit will be filed.
Rule # 2. Any Asset you own in your own name or in your spouse’s name will be vulnerable to a lawsuit and is often times an invitation to an aggressive trial attorney to sue you. This includes personal assets such as your home, savings, brokerage accounts, rental properties, vacation home, cars, jewelry and other personal properties.
Even if you have created a corporation for your medical business, if you are the owner of all the stock, or even more than 10% of this stock, it can be considered a closely held corporation and you will be considered an officer of this corporation. As such, you can and will be held responsible for the actions of this corporation which leaves all of your personal assets vulnerable to a lawsuit. The use of an LLC can in fact, give your practice better asset protection, but it like any other asset protection entity, it will only protect your practice if a lawsuit is created outside the practice.
A few years ago a physician in California sent his secretary out to pick up sandwiches for his office staff. She hit another car and killed a couple of people in an accident. It was a terrible tragedy, but only adding to the tragedy – since she was on an errand for the practice, a wrongful death lawsuit was filed naming both the practice and the physician. The 30 million dollar jury award took everything the practice owned and also everything the physician owned as well. The physician was set up as an LLC being taxed as a C corporation, but since the practice caused the lawsuit and all of his personal assets were in his own name, he lost everything he had worked for over 30 years. So what was it that he had done wrong?!
Any entity creating a lawsuit can be sued and everything owned inside of this entity will be vulnerable to the lawsuit. As a physician your job is to help save and improve the lives of the people around you, but if you don’t take the time to understand how to protect yourself then you could easily find yourself in a position where you can’t help anyone at all. So how do you protect yourself?
There are certain entities available that afford better overall protection than others – and if used correctly can eliminate the threat of losing everything in a lawsuit. The only way to truly protect your personal assets is to ensure that they are in the right entities, and to make sure that you have a strategy in place together with those entities.
Matt – Legally Mine
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- The Family Limited Partnership – Part 2, Legally Mine (legalwindbag.wordpress.com)
- Using Multiple Operating Businesses, Real Asset Protection Strategies – Legally Mine (legalwindbag.wordpress.com)