What to do if I’m thinking about dissolving my business corporation in order to lower the overhead and slow down?

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What to do if I’m thinking about dissolving my business corporation in order to lower the overhead and slow down?

I am a holistic practitioner and a massage therapist and am covered with a 2mill/6mill liability insurance through AMTA. I see that many massage therapist choose to practice without being incorporated, so am wondering if the professional insurance would be enough protection. I spoke with my accountant; he is against it but he gets paid more if I keep the corporation, so am looking for a neutral person to advise me.

Asked on July 19, 2013 under Business Law, Maryland

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

How much would you save by not being a corporation--and is it worth the risk? Without a corporation--that is, practing solely in your own name--you do run the risk of a personal judgment against you if

1) you are sued for something covered by your insurance (e.g. injury to a client) and any of the following occur: a) the award exceeds the insurance (you'd be responsible for any extra); b) you somehow let the insurance lapse (e.g. missed a payment) or the insurance was otherwise cancelled at the time of the injury; or c) the insurer can make the case you violated your obligations, such as by not sufficiently cooperating.

2) you are sued for something not covered by insurance--such as by your landlord, for nonpayment of rent; by a contractor for work he/she did, or a supplier for goods sold to you; by a bank for any loan to the business; etc.

Personally, I believe that incurring these risks--especially 2) above, which is very broad-ranging--exceed the cost of the corporate structure, but you need to decide for yourself.


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