I'm considering consulting out of state. What kind of incorperation?

[James A. Kuzdrall]

On Monday 28 January 2013 22:28:44 Bill Freeman wrote:
> I have a potential gig on Long Island on a 1099, but will remain domiciled
> in NH.  I figure that I should become a LLC or sole proprietorship or
> something.  Suggestions?

    I have been operating an engineering business in NH as a proprietorship 
since 1971.  Most of my business is out-of-state or overseas.

    I was sued in the 1980s for $5M, and in the process learned a lot about 
how the system works - and you notice, I am still operating as a 
proprietorship.  Since I haven't been sued lately, some of my data may be out 
of date.

    The purpose of a corporation is to protect people who invest in the 
company but do not actively participate in it.  The stockholders of Samsung 
will not have to pay Apple anything.  That is all it does.  Oh, there is one 
more thing - it makes money for the state, accountants, and lawyers.

    I had to counter-sue in response to the suit.  I told my lawyer it was of 
no use because I knew the guy took all the money out of the corporation.  The 
lawyer said it would take 10 minutes in court to break through the 
corporation to his personal assets, and that is all it did take.

    They put a lien on my house, but under NH law they could not take away 
what I required to make a living.  The state does not want a civil law suit 
making a pauper out of a contributing citizen.  My wife was co-owner of the 
house and I ran my business from the house, so none of that was on the block.  
Nor could they take me car or personal stuff like clothes.  (They might get 
me Rolex, though, if I was vain enough to have one.)  So my savings and 
investments were on the table, as were his.

    It went to trial after 4 years, and I won the counter-suit - being talked 
into a negotiated settlement by the lawyers.  That still has me angry, but 
the story is too long for here.

    A better protection than a corporation is a license of some sort.  As a 
licensed Professional Engineer, a plaintiff has to prove I did something 
wrong.  Un-licensed, I would have to prove I did everything right.  That is a 
major difference!

    Common certifications most likely don't have that force of law, but you 
could probably convince the judge to view you as an expert and get a similar  
break.

    To avoid the taxes, professional fees, and paperwork, I am quite content 
to stay a proprietorship.  (The tax write-offs are the same, of course.)

Jim Kuzdrall