John Tormey III: New York Lawyer

New York Entertainment Lawyer John J. Tormey III, Esq. John J. Tormey III, PLLC: My name is John J. Tormey III. This is my blog. I am a New York lawyer, also admitted to practice in California and the District of Columbia. My focus is on entertainment, art, media, copyright, trademark, limited liability company law, and music A and R (Artist and Repertoire) matters. I formerly served as Counsel to The Walt Disney Company, and Senior Counsel and Senior Litigation Counsel to Miramax Films.

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Saturday, January 5, 2013

LLC’s, Corporations, And Other Business Structures - Part III: Written By New York Entertainment Lawyer And LLC Counsel John J. Tormey III, Esq.

http://www.tormey.org/business3.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

LLC’s, Corporations, And Other Business Structures - Part III: Written By New York Entertainment Lawyer And LLC Counsel John J. Tormey III, Esq.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

Part II of this article discussed how individuals historically incorporated their businesses in the hopes of avoiding personal liability, but then often became dissatisfied with the so-called “double taxation” thereby resulting. This, among other motivations, brought the S-corporation and then, the limited liability company (LLC), into being. As a New York entertainment lawyer practicing in this day and age, I most often see limited liability companies (LLC’s) as opposed to other forms of entities used in film, music, television, publishing, and Internet businesses. However one cannot understand and appreciate the advantages typically provided by the limited liability company (LLC) unless superimposed as bas-relief upon the entity’s historical context – which gives further meaning to the LLC across all sectors and industries including entertainment and media.

Society clearly benefits from encouraging people to start businesses - and take some commercial risks without an attendant risk of personal ruin. Yet otherwise well-intentioned and well-motivated people were either quitting businesses or exposing themselves to personal liability - in both instances due to their aversion to the so-called “double layer of taxation” engendered by the C-corp. Additionally, the “double” taxation of the C-corp was creating a disincentive for new people to go into business - particularly those who were risk-averse. There had to be a better way.

That better way, at the time, was the S-corp, which came into existence a number of years ago principally for the above types of reasons and rationales. It was named after a “Subchapter-S” in the Internal Revenue Code of the United States, and was regularly recognized by the IRS and state tax authorities alike. One of the familiar tasks for an entertainment lawyer became the act of ensuring that clients timely made their appropriate S-corp elections (see below) with appropriate governmental authorities – hardly the romantic notion one would have of what it is like to interact with talent and go to celebrity premieres..

Akin to the C-corp in most other respects, the S-corp only mandated a single layer of taxation, as opposed to the C-corp’s double layer of taxation. But there were also a few catches.

One had to make a formal written “election” (or in some cases, “elections”) to qualify as an S-corp. If one didn’t do so in time by a strict deadline, one would lose S-corp status and be “doubly” taxed like a C-corp instead. As most entertainment lawyers can attest, this kind of eventuality could actually snuff out a fledgling entertainment or media start-up business in its first years of existence, already engaging in risky and speculative business activity as is often the case in media and entertainment.

There were other restrictions on S-corps, too, such as a limit on the number of shareholders, a limit on foreign ownership, and a limit on corporate parent-subsidiary ownership. Some of these restrictions have been loosened - and in some cases eliminated - in recent years; so one should not rule out the S-corp without first updating its tax code requirements with one’s lawyer – entertainment lawyer or otherwise – as well as one’s tax accountant. The historical restrictions of the S-corp put business owners in a “Catch-22” situation - they clearly wanted a single layer of taxation, but in the context of an entity that wasn’t so restricted. The newer solution: scrap the idea of a corporation at all, and instead form a limited liability company, or LLC.

The limited liability company (LLC) is akin to the S-corp but without most of the attendant historical restrictions. Yes, there were a certain number of restrictions on the LLC, too, when it first appeared on the scene - most of which were subsequently lifted by either the IRS or state legislatures, or both. Again, S-corp restrictions have also been lifted in recent years, making the S-corp and limited liability company (LLC) look more similar to each other as time goes on.

But even as of this writing, the limited liability company (LLC) is usually considered the most advantageous entity from a tax perspective of all 3 most commonly available forms, for the small business owner to create. As a media and entertainment lawyer, the LLC is the entity which I am most often asked to create. The LLC is also considered the most flexible of all 3 entities. What does “flexible” mean? Well, it is considered easier to adapt the LLC to later-occurring additional equity-holders in one’s business, for example, which is another familiar task for an entertainment lawyer in the context of artistic co-ventures - and the word “easier” in this context translates to “less legal fees”. The LLC is in most cases an entity which is easier to manage and administrate.

There are some disadvantages to the limited liability company (LLC), too. The LLC can take more time to finalize, and in some cases can be more expensive to form and/or file with the government - as compared to an S-corp. Some states historically prohibited 1-person LLC’s. Some states still have an underdeveloped body of judicial case law on the LLC, since the entity is still quite new in many states - so the treatment of the LLC under the law may be less certain than the treatment of a corporation. We in New York have an odd restriction, too, as a result of the powerful newspaper and media lobby galvanized during the legislation’s enactment which as a media and entertainment lawyer I suppose that I should not begrudge. This restriction may be present in another state or two as well in analogous form. The restriction is this: if one elects to form a New York LLC, one must publish its existence in periodicals for a number of weeks, before being accorded the legal privilege of initiating a litigation - as a plaintiff - in the LLC’s name in the New York courts. Publication of an LLC’s naissance in Manhattan is expensive - the publication of a limited liability company in periodicals of the creation of a proposed Manhattan LLC can range between $1,000 and $3,000 (the figures can vary and are smaller in other parts of New York State apart from Manhattan).

Even so, the limited liability company (LLC) is considered the trend-setting entity of those “in the know”, across the country. As an entertainment lawyer in New York, I have noticed that hipster Californians gravitate to LLC’s just as much as hipster New Yorkers seem to do. And part from hype, assuming that one can afford to form an LLC, and assuming that one can live with whatever restrictions apply to the LLC in one’s jurisdiction, it may in fact be the entity of choice, and an improvement over the older S-corp and C-corp structures.

A limited liability company (LLC), though frequently mistaken for a corporation, is technically not considered a corporation – rather, it is an unincorporated entity under the tax code, more like a partnership than anything else, but one that (like the S-corp and C-corp), if properly formed and maintained, should provide its members with insulation against personal liability.

If one doesn’t incorporate or form a limited liability company (LLC), the business will likely be what is known as either a sole proprietorship (if a 1-person company), or a general partnership, de facto or otherwise, (if comprised of 2 or more persons). Any entertainment lawyer or other lawyer will opine that this could result in unlimited personal liability for the entity’s owner or owners. Again, that means that an owner’s personal assets can be at risk to satisfy the obligations and debts of the business. Any entertainment lawyer or other lawyer will opine that personal liability is not a risk worth taking. In addition, using a corporate entity or limited liability company (LLC) – particularly an LLC in this day and age - could add a good deal of “cachet” or credibility to one’s business endeavors, in the eyes of other persons and companies with whom the business has contact.

Click the “Articles” button at:

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My law practice as an entertainment lawyer includes incorporations and the formation of limited liability companies (LLC’s). If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Page:

Business Structures - Part III

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Tuesday, January 1, 2013

Independent Contractors vs. Employees - Part I: Written By New York Entertainment Lawyer And Employment Attorney John J. Tormey III, Esq.

http://www.tormey.org/contractors1.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Independent Contractors vs. Employees - Part I: Written By New York Entertainment Lawyer And Employment Attorney John J. Tormey III, Esq.

As an entertainment attorney practicing in New York, I see people and companies struggling to address the definition of independent contractor vs. employee, frequently. Anyone who hires workers or is thinking of doing so, in New York or elsewhere in the United States, should be aware of the following. Before hiring anyone, it is critical that one carefully determines with one’s accountant and entertainment attorney or other counsel whether the new hire is to be an “employee”; or, alternatively, an “independent contractor”. The terms have legal and financial import; they are mutually exclusive; and one should never use them interchangeably.

The distinction between the two types of workers is important because, among other things, it is usually more expensive and more administratively inconvenient to hire and pay “employees” as opposed to “independent contractors”. On the other hand, few persons or companies that hire workers are truly willing to relinquish control over their hires, to a sufficient degree to allow those workers to accurately be characterized as “independent contractors” as opposed to employees. As an entertainment attorney, I frequently encounter business projects of short duration such as a single film shoot, a single album recording, or a single pilot shoot. The question of “independent contractor vs. employee” therefore arises most often in the context of media and entertainment projects of multi-week or multi-month duration. Though the two constructs, “independent contractor” and “employee”, are not necessarily self-defining, the word “independent” is used for a reason, and truly translates to “loss of hiring-party control”. I’ll explain below.

The U.S. Internal Revenue Service in (former) “IRS Publication 937” identified 20 “checklist” factors that it considered when determining whether or not an individual worker is an “independent contractor” as opposed to an “employee”. The litmus test has apparently since evolved somewhat. See, e.g.:

http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

The hiring party should review the most updated version of the IRS criteria prior to any hires, and it is probably more important to do so with one’s payroll company and tax accountant, than one’s entertainment attorney. The hiring party should also be aware that the IRS is not the only institution with whom to be concerned regarding the all-important “independent contractor vs. employee” determination. Other governmental agencies have a stake in preventing mischaracterization of workers as independent contractors, too.

For example, the state Department of Labor (state “DOL”) in one’s own home state may apply its own checklist of criteria to distinguish independent contractors vs. employees. One needs to be aware that there is a federal [US] Department of Labor as well as a state Department of Labor. A hiring party needs to comply with the requirements of both. In a perfect world, there should be consistency between the respective “checklists” of the IRS and the applicable DOL, as well as consistency between each agency’s interpretation of those checklists. However, your entertainment attorney and tax accountant will opine to you that the world isn’t perfect, and those interpretations could differ as to what constitutes an independent contractor versus an employee. Therefore, one should be aware as to how a local state DOL characterizes the two different types of workers, too - if different than the IRS characterization. Additionally, from an enforcement perspective, the DOL could challenge a hiring business’ characterization of its workers as “independent contractors” vs. employees, without the IRS joining in on the contest. The IRS and the DOL are separate agencies, although there is a suggestion that they will more thoroughly share electronic data with each other on field data and this issue in the near future.

The “independent contractor” determination can be the proverbial unstable apple cart, easily tipped. An employer, as most know, should withhold taxes from an employee’s pay, and make unemployment contributions with respect to those employees, among other things. Hiring companies in the entertainment field, for example, even if they already have an entertainment attorney and a tax accountant, still often wisely use a “payroll company” to administrate payment obligations to workers, so as not to transgress. The cost of a hiring party mischaracterizing an employee as an independent contractor instead, could be high. If ever in doubt, payroll companies and accountants should skew cautious and conservative when making the distinction for their clients in favor of employees – and the entertainment attorney will usually tell the client to listen to his or her payroll company and tax accountant.

However, let’s say that a hypothetical music recording studio, or film production company, for that matter, hires 20 workers, characterizes them all (in reasonably good faith) as “independent contractors”, but uses no payroll company, tax accountant, or entertainment attorney initially. Let’s further assume that the film production or music studio pays no unemployment insurance or workers compensation contributions with respect to any of the hires, and does not withhold taxes from their paychecks. Then, one independent contractor worker is terminated, and vindictively files with the local state DOL for unemployment compensation, claiming to be a fired “employee” instead. Even after phoning the entertainment attorney and tax accountant to enlist their retroactive help, it may now be too late. The recording studio or film production could now find itself faced with a state DOL that characterizes not just the one claimant-worker - but all 20 workers - as “employees” as opposed to “independent contractors”. The apple cart tips. The camel’s nose is now in the tent.

The recording studio or film company may be required to litigate administrative hearings on the independent contractor v. employee question, and may thereupon be assessed retroactive unemployment insurance contributions, interest, and penalties with respect to the workers that “should have been paid as employees”. Other actions may also follow, such as a workers compensation audit, and perhaps even findings by the IRS and local tax authorities with respect to claimed monies that “should have been withheld” from the “employees” pay. The argument of, “But I told them they were independent contractors” may be considered a mere ipse dixit proposition and might not wash with the government. The entertainment attorney or the business owner can state the case to the authorities that short-term hires are the bread-and-butter of the local entertainment economy in the jurisdiction and so should be rewarded and not punished, but the adjudicating authorities may not accept that distinction between entertainment and non-entertainment sectors. Their only care may be to decrease the overall number of independent contractors and increase the total number of employees across all industries and sectors.

Could this nightmare have been avoided by the recording studio or film production company, through documentation, prospective use of its entertainment attorney, or otherwise? The answer is “Maybe yes, maybe no”. Please see Part II of this article for a further discussion.

Click the “Articles” button at:

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My entertainment law practice includes state and federal employment law matters relating to independent contractors and employees and other human resource matters as they arise in the fields of film, music, television, publishing, Internet, and other media and industries. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

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Independent Contractors vs. Employees - Part I

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Personal Service Contracts: Written By New York Entertainment Attorney And Film And Music Lawyer John J. Tormey III, Esq.

http://www.tormey.org/personal.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY 10128

USA

(212) 410-4142 (phone)
(212) 410-2380 (fax)
brightline@att.net

http://www.tormey.org

Personal Service Contracts: Written By New York Entertainment Attorney And Film And Music Lawyer John J. Tormey III, Esq.

1. What Items Should Appear In A Personal Services Contract?

An entertainment attorney will opine that personal services agreements in New York, California or elsewhere can be fairly complex in regard to the issues that they present - yes, even if the total compensation payable under the personal service contract is not too large. It would be beyond the scope of this article to set forth an exhaustive list of issues for the entertainment attorney to spot in any New York or other personal services contract. But some of the key issues for talent, in a personal services agreement in the entertainment world, are considered to be:

A. Compensation: The first talent-side entertainment attorney contract concern.

How much will one be paid, and how will one be paid, under the personal services contract?

B. Credit. The second talent-side entertainment attorney contract concern.

What credit, if any, will one get for one’s work, and in what manner, pursuant to the personal services agreement?

C. Term. The third talent-side entertainment attorney contract concern.

This is a critical point: For how long will one be required to render services under the personal services contract?

D. Territory. The fourth talent-side entertainment attorney contract concern.

In what country/city/state/territory is one required to render services pursuant to the personal services agreement?

E. Media. The fifth talent-side entertainment attorney contract concern.

In what specific media can, and can’t, one’s work product be used according to the personal services contract?

F. (Non)Exclusivity. The sixth talent-side entertainment attorney contract concern.

Is the artist exclusive to the hiring party; or alternatively, can the artist work elsewhere and/or in other ways during the Term of the personal services agreement?

G. Worker Status. The seventh talent-side entertainment attorney contract concern.

Is the worker an employee, or an independent contractor, under the personal services contract (choose only one answer!)

There are actually quite a number of other issues for an entertainment attorney, or the intended signatory client, to consider, in the context of personal services contracts, in addition. The above list will certainly start the contractual dialogue or respond to the contractual dialogue of any prospective hiring party, however.

2. What Should Be Avoided In A Personal Services Contract?

Again, it would be beyond the scope of this article to set forth an exhaustive list of all contractual traps for the entertainment attorney to avoid in personal service agreements, as a matter of New York law or otherwise. Indeed, there are probably at least as many contractual traps, as there are New York and Los Angeles in-house entertainment lawyers working at these hiring corporations! (and I say this with all due respect to my friends who work in-house, of course). But some of the more colossal mistakes that an artist could make in a personal service contract, typically without first consulting an entertainment attorney, might be as follows:

A. Back-End: Taking the entirety of one’s compensation under the personal services agreement, as contingent or “back-end”. This Hollywood hustle is just as familiar a phenomenon in New York City’s TriBeCa and elsewhere, as well. The fact of the matter is, if the artist is a professional, or if the artist otherwise values his or her own skills and time, then the artist’s work product is valuable and should be recognized as such under the contract. The “buyer” of services and work product under the personal services contract should be required to put at least some earnest money on the barrel, first – whether that barrel be located in New York or anywhere else. One of the entertainment attorney’s functions should be to make this happen. And, the artist should not be expected to commence services under the personal services agreement until those numbers first show up in the artist’s bank account, whatever the numbers are negotiated to be, by and between the entertainment attorneys on either side of the contract.

B. Vagueness: Leaving the Term, Territory, Media and Exclusivity provisions vague in the personal services contract. Artists have found their careers paralyzed for huge amounts of time, due to contractual mistakes like this. No non-lawyer should try to write or edit these personal services agreement clauses on his or her own, and the drafter and/or editor of the contract really should be an entertainment attorney solely representing the artist. No one should blindly sign on to these contractual clauses as offered, particularly if they are vague. (In other words, don’t try this at home. Get professional help from an entertainment attorney, period). For example, if the artist only intended to bind himself or herself to a manager exclusively for New York work alone, imagine her surprise when the manager seeks a commission for a Los Angeles gig that the artist booked on the artist’s own.

C. Forever: Failing to limit the Term of the personal services contract to a reasonable and precise period of time. “Perpetuity”, if ever agreed to, is guaranteed to become one’s own private Hell – sort of like a New York City subway tunnel at 3:00 AM, but worse. The contractual Hell would be forever, and after all, the entertainment attorney may not live to see the artist through a period of time that long. Leaving the Term quantitatively vague in a personal services agreement is just about as bad a mistake as calling it “Perpetuity”, and an entertainment lawyer should prevent an artist from making this contractual mistake. Life is too short and valuable to make open-ended and blank-check commitments to people – in personal services contracts, or otherwise.

3. How Can A New York Entertainment Attorney Tell If A Personal Services Contract Is One-Sided In The Hiring Party’s Favor?

The answer is, if the hiring party furnished the personal services agreement to an artist, then the contract is one-sided in the hiring party’s favor! That was a rhetorical question. And the ability to answer it is not really limited to New York entertainment lawyers alone.

The hiring party is under no obligation to protect the artist’s interests in a legal document, personal services contract or otherwise. If upon receipt of the intended contractual document, you snooze, then you lose. One’s entertainment attorney is one’s hope for re-calibrating the scales of justice evenly, in this type of proposed contract and in this type of fact-pattern. The New York courts might even look to whether both sides of the contract were represented by counsel at the time of signing, before upholding the contract or any of its specific clauses. Retaining entertainment lawyer counsel could have multiple and long-term benefits throughout the life of the contract.

And many entertainment lawyers can speak to this phenomenon from their own “personal” experience. Many of us entertainment attorneys, in New York and elsewhere, have drafted, edited, negotiated, and reviewed hundreds or even thousands of contracts. Many of these were personal service agreements. If polled, few New York or other entertainment lawyers can remember even one personal service contract first offered by a hiring party to any talent clients, that was ever fair.

There is a reason why many New York and other entertainment attorneys and others in the entertainment industry refer to the first-offered personal service agreement form, as the (euphemism) “F.U. Form”. Once an artist retains entertainment lawyer counsel to represent the artist on the personal services contract, one of that entertainment attorney’s first functions is:

A. To get the hiring party to cough up a real personal services contract form in lieu of the “F.U. Form”; if not

B. Take over the drafting of the personal services agreement, entirely.

And yes, signing any entertainment industry proposed personal services agreement, either: (i) on-the-spot, or (ii) in the version exactly as first offered for signature with no contractual edits made, without an entertainment attorney advising you, often turns out to be a mistake.

Click the “Articles” button at:

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My New York entertainment law practice includes the drafting, editing, negotiation, and closure of personal service agreements as well as all other contracts and entertainment transactional and advisory matters in the fields of film, music, television, publishing, Internet, and all other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY 10128

USA

(212) 410-4142 (phone)
(212) 410-2380 (fax)
brightline@att.net
http://www.tormey.org

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Personal Service Contracts

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Sunday, December 18, 2011

LLC’s, Corporations, And Other Business Structures - Part I: Written By New York Entertainment Lawyer And LLC Counsel John J. Tormey III, Esq.

http://www.tormey.org/business1.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

LLC’s, Corporations, And Other Business Structures - Part I: Written By New York Entertainment Lawyer And LLC Counsel John J. Tormey III, Esq.

While many artists continue to do business as individuals, there often comes a point in their career when it makes sense to ascend to the next level - to create a business, to create a company, usually in this day and age a limited liability company (LLC) or a corporation, with its own name and identity. In the fields of arts and entertainment, this process is often handled by and through an entertainment lawyer, and is often the first reason for which a new client seeks counsel. If you are an artist who has reached that point in your career, or even if you have already surpassed it and want to revisit your decision, then this article is for you. I am a New York entertainment lawyer who regularly handles corporate and LLC matters and my contact information appears below.

1. Choosing a Name For A New Business

If one is choosing a structure for a small business, there are a number of different types of business entities that can be formed. At minimum, one likely will need to assess the relative merits of the subchapter-”S” corporation (“S-corp”); the subchapter-“C” corporation (“C-corp”); and the limited liability company (“LLC”). This choice will be described in more detail, below, and in Part II and Part II of this Article. But the first issues one should address, also typically addressed with and through one’s entertainment lawyer, are the trademark considerations which may arise as a result of the chosen name for the limited liability company (LLC), corporation, or other form of company.

“Fanciful” (i.e., fictitious) new business names for a limited liability company (LLC), corporation, or other form of entity should be searched as trademarks, especially in fields like entertainment where name recognition can be so important. Entertainment lawyers will routinely search and then issue opinions on proposed trademarks of properties for clients, including trademark-searches on LLC names and corporation names themselves. Why go through this process? Because a new LLC, corporation, or other form of business needs to confirm that no other businesses have prior rights or viable claims to its newly-proposed name (or a name substantially similar to its newly-proposed name). In any event, one may be barred from registering a corporate, LLC, or other business name, if someone else has already registered the same name in the jurisdiction in which the entity-filing is intended. Moreover, if one’s business is intended to ultimately be national or international in scope, as is often the case in entertainment-related and Internet-related LLC’s and corporations, a careful trademark search conducted through one’s entertainment lawyer becomes all the more important. One doesn’t want to invest sweat and equity in a fanciful business name, only to later find out that he or she is legally prevented from using it, or is unable to stop others from infringing on the newly-chosen business name.

Principal owners of a new business do sometimes elect to incorporate or form a limited liability company (LLC) under their own legal and given name (i.e., “John Doe, Inc., or “John Doe LLC”), instead of a fanciful name, in the hopes of saving money that they would otherwise spend on a trademark search through an entertainment lawyer. But there are at least two potential drawbacks to doing so:

Incorporating or forming a limited liability company (LLC) under one’s given name often makes it more difficult to later successfully develop a separate and distinct brand identity for one’s products and services.

Incorporating or forming a limited liability company (LLC) under one’s given name (or even a variant thereof) marginally increases the chances that a court may be inclined to let a plaintiff “pierce” one’s “corporate veil” in a litigation, if the “corporate veil” issue ever arises. “Piercing” means “finding individual economic liability” on the part of the owner/principal. The plaintiff’s argument would be that a self-titled corporation (or LLC) is more likely to be the “alter ego” of its individual principal. Now, although the odds of one’s “veil” being “pierced” may not be that high - assuming that the business owner observes all other corporate or LLC filings and formalities up until that point - the risk of individual liability is still worth mentioning. After all, for many people, the avoidance of “personal liability” and the avoidance of possible “veil piercing” is the whole reason for their incorporating or forming an LLC in the first instance.

What do I mean by “personal liability”? That is probably the most important legal concept that a limited liability company (LLC) owner, corporation owner, or other form of business owner will ever seek to avoid! Please read the next installment of this article.

Click the “Articles” button at:

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My law practice as an entertainment attorney includes incorporations and the formation of limited liability companies (LLC’s), as well as work relating to trademarks and service marks. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Page:

Business Structures - Part I

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ATTORNEY ADVERTISEMENT

http://www.tormey.org/business1.htm

Friday, December 16, 2011