Legal Question in Business Law in Massachusetts

Re: Protecting Your Home

Yes, you can form an entity, but NO it WILL NOT keep claimants from getting at your assets from tort claims if your husband is actively conducting the work. It would protect only against contract claims. Some examples:

1) Your husband builds a porch that collapses and causes injuries. All injured parties can sue your husband's business entity AND your husband personally for his negligence in constructing the porch.

2) Your husband is driving on company business from a job site to pick up some materials, and is at fault in an accident. All injured parties can sue your husband's business entity AND your husband personally for his negligent operation of the motor vehicle.

3) Your husband does defective work in a construction project for a general contractor. Both the owner and the GC can sue your husband's business entity for contract damages (the amount it takes for someone else to do the work properly) but NOT your husband personally.

Anyone trying to tell you that forming an entity (e.g., corporation, limited liability company) will protect against all claims is simply misrepresenting the facts -- take the above examples and ask detailed questions. You see, the kind of "frivolous" litigation that concerns you is likelier to be a tort claim than a contract claim. Further, it costs money to form and maintain an entity; insurance is much cheaper! And the advice about the homestead exemption is correct -- file it if it isn't done already.

Best wishes,

LDWG

Re: Protecting Your Home

First, assuming your husband is licensed, he should form an LLC or a Corporation. This will protect against contract claims. Second, your husband should get business insurance that covers him for tort claims and should put his business vehicle under the entity�s name and insure it properly.

The business entity will not protect your husband from tort claims. So he will need the appropriate insurance.

Make sure you have filed a Homestead exemption and that your deed says you own the property as �Tenants by the Entireties.�

If you have more questions, please feel free to contact me by phone.

Re: Protecting Your Home

You may also consider two other safeguards:

1) you may wish to file a homestead declaration if you have not already done so - for more information on the Massachusetts Homestead Act which currently protects up to $500,000 of value in a primary residence from certain creditors - go to the following link:

http://www.lawlib.state.ma.us/homes.html

2) your husband may wish to conduct his business in the form of a limited liability company (LLC) or S corporation - in either case, income earned by the business can be structured so that it is essentially taxed as if he earned the income directly - while providing a level of limited liability

If you need assistance with the above options, feel free to call my office at 617-542-3333.

Disclaimer: Please note that the above is only for informational purposes. It does not create an attorney-client relationship. Proper legal advice can only be given after we have a signed engagement letter and we have discussed fully the facts in your particular case.

Re: Protecting Your Home

Is there a 100% guarantee? No. But there is a lot you can do. An S-Corp and LLC and Homestead are good starts, but there are some other advanced stategies you can use to protect the home as well. Seek an attorney who can handle your business organization needs and also handles trust and estates.

Re: Protecting Your Home

There are no guarantees in life, but there are several things your husband should consider before opening his contracting business. He should operate not as a sole-proprietorship, which would mean your house could be at risk, but either as a corporation or an LLC. In this way, his business would be a separate and distinct entity and your house would, under normal circumstances, not be a part of it. You are correct about the things are in the USA, so you should also consider recording a homestead which would protect up to $500,000.00 in equity in your house or conveying the house to a realty trust or to you. The latter would divest your husband of title so that he would no longer have an ownership interest in your house. I would be pleased to discuss these matters with you at a time of your convenience. Barry