So let me see if I understand this correctly... If I was to affiliate with an indy BD (LPL) they are required to make their payments to me as an independent contractor (1099), not my S-Corp or LLC, so this means that the liability protection afforded by choosing an S-corp or LLC is useless? If that's the case then I would see why some would simply choose a sole proprietorship and protect via E&O, Umbrella, etc...

I imagine that if you have employees then you would want the protection you get from an S-corp or LLC at least for any problems that may arise from them or their actions?

Also, as an independent contractor who would the client sue and who would be responsible? The BD or the rep?