Will an LLC protect a professional from personal liability?
Ralph: I have an LLC, and I hold professional liability insurance for $1 million. What happens if somebody sues me for my functions and it exceeds the limits of my liabilities, sir. What will happen?
Attorney Tom Olsen: Ralph, you're a bit outside my area of expertise, but let me tell you what I think is going to happen. If you read the Florida statutes, and it says that if you are required to be licensed by the state of Florida to do what you do, like lawyers, like doctors, like therapists, if the state of Florida requires that you be licensed, it means that you cannot avoid personal liability, so Ralph, if you have a construction company, you don't need to be licensed by the state of Florida, like I'm speaking of, at least.
If your LLC, your construction company, hurt somebody, that person would be limited to suing your LLC, would be limited to your $1 million policy limits. If you are a licensed professional, like a doctor or a lawyer or a therapist, and there's more, I don't know who they all are, if you're a licensed professional, then you hurt somebody as part of your profession, they can cut right through your LLC and go beyond your 1 million dollar policy limits and sue you personally. Ralph, does that make sense to you?
Ralph: It makes sense, only that I'm licensed by the federal government, so I do business all over the country and the world. Does that make a difference?
Tom: Yes, tell me, what line of business are you in, Ralph?
Ralph: I have a delegation from the Federal Aviation Administration to certify aircraft doing their [unintelligible 00:02:03]
Tom: Ralph, I'm going to take a guess off the top of my head that what I was speaking of as far as a licensed professional, like a doctor or a lawyer or a therapist is not going to apply to you. I'm going to give you what I think is my best opinion, and that is that your LLC is serving you for the purpose of avoiding personal liability. If your LLC hurt somebody, it's my opinion off the top of my head, but you'll want to double-check me, that whoever gets hurt via that would be limited to suing your LLC and going after the assets within that LLC and going after your $1 million policy.
Ralph: All right. Well, that educates me a lot much more than I was before. I really appreciate your answer, sir.
Tom: Hey, Ralph, is your LLC a Florida LLC, by the way?
Ralph: It is.
Tom: Ralph, this is important to you and enough to give us a call, and I fully appreciate that. I would really like for you to double-check my opinion about this. There are lawyers out there that specialize in asset protection, so if you were to Google asset protection lawyer and present this question to them, or-- Actually, let me give you another great resource, Ralph. I've been referring this more and more to people, and it's a website called avvo.com, A-V-V-O.com. Victor [unintelligible 00:03:36] Apple, Victor, Victor, Oscar.com.
That is a site wherever you are in the United States, lawyers are members of it, including us, that if you type a legal question in there, there are lawyers who monitor those questions all the time, and my experience is you pop up with five or six lawyers that have really gone out of their way to give you some great legal advise through this website, avvo.com.
Ralph: That's great. No one is suing me right now, but you never know. [chuckles]
Tom: Ralph, what you need to know is that this much I can tell you that here in the state of Florida that once you think you're going to get sued or once you're being sued, you cannot start moving around assets as a way to protect your wealth from creditor claims. It's called a fraudulent transfer statute. Ralph, now, while nobody is suing you, now is the time to build up your defenses and make sure you're covered from every angle.
Ralph: All right. Pass it on to the kids, I guess.
Tom: That's the goal, Ralph.
[00:04:49] [END OF AUDIO]