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Editor’s note: This column is based on the author’s presentation of the same title at Face & Body® Midwest 2012, which took place at McCormick Place West in Chicago in March.
Skin care professionals can run into a variety of financial and legal problems in the course of owning and running a business. Three of the most common issues are vulnerability to lawsuits, overpayment of taxes and the lack of a viable estate plan. Part I of this two-part column will address tactics skin care professionals can take in order to become less vulnerable to lawsuits, and Part II will address the issues of tax overpayment and estate planning.
Skin care professionals are exposed to a number of lawsuits, including premise liability, employee liability and others. If you are not properly structured, it only takes one lawsuit to lose everything. The solution is to place assets into properly drafted legal entities.
All of your professional and personal assets can be moved into properly drafted legal entities to ensure that they are 100% unreachable to would-be plaintiffs and attorneys. If an attorney does an asset search on you and your business in conjunction with a potential lawsuit, he will find that there are no assets available to seize. Because most lawsuits are done on contingency, and attorneys want to make sure that they get paid for their efforts, they may not be willing to file a lawsuit against you. Placing your assets into properly drafted legal entities removes the financial incentive for prosecuting attorneys and, thus, helps prevent lawsuits.
Many advisors recommend their skin care facility clients operate as sole proprietorships because of the simplicity—you simply have to report the business on Schedule C of your tax return. There are two major problems with operating as a sole proprietorship.