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... the debts of the partnership. This is a major drawback of a general partnership. This liability may be insured against to some extent by errors & omissions insurance and other liability and workers compensation insurance. Corporate stock can be held by a partnership. Use of an corporation, which actually conducts the agency business, but which is owned by a partnership rather than individual stockholders, can reduce liability exposure, yet retain partnership benefits such as deductible liquidation payments to retiring partners. 1.2.4 Ordinary business corporation or C corporation. A properly formed corporation is a separate entity from its shareholders for liability and tax purposes. This means that if the corporation is property formed and operated, a shareholder is not personally liable for corporate debts. He only risks losing the value of his stock. It is possible to pierce the corporate veil' of an improperly formed or operated corporation, so the corporation must be adequately capitalized and corporate formalities must be observed. An officer or shareholder may still be liable for his own wrongdoing. For example, a shareholder agent may be liable for his own errors and omissions, and his corporation may be liable for them as well. However, the shareholder will not be personally liable for another shareholder's errors & omissions. An ordinary business corporation (or C' corporation) is subject to income tax, and its shareholders are also taxed on dividends they receive. The possibility of double income taxation exists for a C corporation, once at the corporate level and once at the shareholder level. This double taxation can be reduced by proper operation of the corporation, such as paying ...

...porate debts. However, to avoid 'piercing the corporate veil', the corporation...ely capitalized, and helps prevent 'piercing the corporate veil'. Ownership o...

... for independent contractors or employees, as well as for the production agency they are associated with, to spell out everyone's rights and duties. In particular, the agreement should state whether it is terminable at will, what benefits the contractor/employee may expect, and how errors & omissions claims are to be handled. Anti-Piracy Agreements are important for owners of expirations, whether individual producers or production agencies, to protect trade secrets. Non-competition Agreements are also important in those cases where such agreements are legal, i.e., when an owner is selling his entire interest in the agency. Buy-sell Agreements or similar arrangements are needed to provide for the death or departure of an owner. Corporate documents such as minutes of incorporated agencies should be kept current, in order to preserve the corporation from attempts to pierce the corporate veil' and sue the individual owners. 2.2 Producer contracts. Every agency should have a form of employment (or independent contractor) contract with its producers at a minimum, and ideally with each of its employees. Such agreements are needed to spell out the status of the producer as employee or independent contractor. They state who owns the expirations being serviced by the producer, and how they are to be protected. They cover how the agreement is to be terminated, and protect against improper termination by the employer and against groundless wrongful termination suits by the employee. 2.2.1 Employee or independent contractor. A threshold question is whether the producer is to be an employee or an independent contractor. The basic distinction between an employee and an independent contractor is that the employer has the right ...

...in certain exposures similar to 'piercing the corporate veil' if they do not o...