Legal Question in Business Law in California

Re: Personal service corporation liability

The two most common reasons that business owners will form a corporation or an LLC are personal asset protection and tax planning. In general, the members of an LLC or the shareholders if a corporation will not be liable for the debts of the business. However, they will not be insulated from liabity for their own actions.

If an attorney or a doctor is incorporated, he or she will not be immune from liability for their own negligence. If a shareholder personally guarantees a debt, then the personal asset protection is waived. The talk show host was probably referring to the direct liablity for their own actions and the host in correct in that sense. Nonetheless, there are usually plenty of good tax reasons to still form a corporation or LLC even without the personal asset protection.

By the way, if you were listening to Handel on the Law, you have to take what he says with a huge grain of salt. In my opinion, he's a complete moron and I hear him give out what I feel is horrible advice nearly every time I listen to his show.