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If I was sued as a sole proprietorship , is it too late to incorporate to gain liability protection ?

Los Angeles, CA |

Hello, thanks for taking the time to answer. The person responsible is one of my contractors. I really have two questions. Does it make a difference that he is a contractor vs employee? Also, I am in the middle of incorporating. I have insurance but Is it too late to gain liability protection since the accident happened last year? I believe we'll be a corporation before the first court date. Thank you.

Attorney Answers 4


  1. Best answer

    Yes, it is too late to gain any liability protection as a corporation if you have already been sued as an individual. Incorporating now would not make any difference for the currently pending lawsuit.

    If the person who is responsible is truly a contractor, then you may have the right to cross-complain for indemnity and contribution from the contractor. However, if the person responsible was your employee, then under the doctrine of respondeat superior, you are liable for your employee's actions.

    If you have insurance, you should immediately tender the lawsuit to the insurance carrier and demand that the carrier defend and indemnify you. If you do not have insurance, or if the insurance company denies coverage, you must immediately retain an attorney to defend you.

    Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This Avvo.com posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult with your own attorney.


  2. "If I was sued as a sole proprietorship , is it too late to incorporate to gain liability protection?" -- For this incident, yes.
    "Does it make a difference that he is a contractor vs employee?" -- If he was an employee you should have had workers' compensation insurance and your liability would have been limited in most cases. Depending on the nature of the work, your exact relationship, and the cause of the injury a truly independent contractor may be 100% responsible for his injuries.

    'I have insurance but Is it too late to gain liability protection since the accident happened last year?' -- For this accident, yes.

    My suggestion? Consult an attorney regarding the specific facts of your situation. Incorporation may, or may not, be the right choice for you. That money could be better spent paying an attorney to represent you in the underlying matter.

    I am licensed in California only and my answers on Avvo assume California law. Answers provided by me are for general information only. They are not legal advice. Answers must not be relied upon. Legal advice must be based on the interplay between specific exact facts and the law. This forum does not allow for the discussion of that interplay. My answer to any specific question would likely be different if that interplay were explored during an attorney-client relationship. I provide legal advice during the course of an attorney-client relationship only. The exchange of information through this forum does not establish such a relationship. That relationship is established only by personal and direct consultation with me followed by the execution of a written attorney-client agreement signed by each of us. The communications on this website are not privileged or confidential and I assume no duty to anyone by my participation on Avvo or because I have answered or commented on a question. All legal proceedings involve deadlines and time limiting statutes. So that legal rights are not lost for failure to timely take appropriate action and because I do not provide legal advice in answer to any question, if you are an interested party you should promptly and personally consult with an attorney for legal advice. Also, see Avvo's terms and conditions of use, specifically item 9, incorporated by this reference


  3. A corporation is an artificial "person". According to your statement, no corporation existed at the time of the alleged wrong. Therefore, that "person" could not have committed a wrong and is not a "party in interest", anymore than an unborn human would be. It is unclear to me who the injured person was. It could have been an invitee, a trespasser, an employee, involved an attractive nuisance etc. There are too many unknowns to answer your question further.

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