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  1. #1

    Default How Can I Be Free Of Potential Personal Liability

    i, along with a partner, am operating a partnership (unlimited personal liability). basically we sell people's stuff on ebay for them, and take a % of the selling price.

    response has been good, but i am beginning to see how easily i could end up in a bad situation, and want to block any personal liabilities that could come up.

    i know i could start a corporation, but i don't think that would necessarily be the most cost-efficient method (we aren't doing any kind of big numbers). i'm thinking possibly an llc or a trust, but i don't know enough.

    oh, i'm in MA by the way. any advice is appreciated.

  2. #2
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: How can i be free of personal liability?

    The easiest solutions are probably an LLC or an S Corporation. You can typically buy a kit of forms to help you incorporate as either type of entity at an office supply store.

  3. #3

    Default Re: How can i be free of personal liability?

    so a trust won't be a viable option? my vague understanding is that if we keep it in a corp (s type) or an llc, we are then taxed that way, but if it is in a trust we can keep it in a solle proprietorship/partnership tax type (not even sure if that is advantageous or not, but assume it is)

  4. #4

    Default Re: How can i be free of personal liability?

    and as far as the forms, do you also suggest that i see a lawyer to make sure they're done properly so that i don't mess them up as a newb trying to craft his own corporation? if so, what type of lawyer (corporate law? is that a type?)

  5. #5
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: How can i be free of personal liability?

    I'm not clear on what type of trust you may be talking about, or how it could affect your personal liability in the operation of a business. Perhaps you should discuss it with a lawyer in your state.

    A lawyer with a business practice should be able to assist you with incorporation, if you believe you require the help of a lawyer. You don't need to go to a big corporate firm - it's usually pretty simple.

  6. #6

    Default Re: How can i be free of personal liability?

    Your best option is probably an LLC. A trust is something different. I don't know what type of computer program you use to keep up with everything but I use Quickbooks. It is cheap and a great program and ties in automatically to Turbotax. I also sent you a private message.

  7. #7

    Default Re: How can i be free of personal liability?

    okay so is it out of the question to hold a company within a trust?

    (will check pm)

  8. #8

    Default Re: How can i be free of personal liability?

    okay, how about this. i am anticipating that it will be hundreds to setup an LLC in MA. (correct me if i'm wrong please). I wouldn't leave such a large responsibility to an online service, i would absolutely do it through a lawyer in person.

    now, my little company does't really make a ton of money, so a $400 bill won't be an easy thing to absorb. i know my partner will probably balk at the idea. that leaves me with several options
    1) pay it myself and incorporate/llc our little company, and he gets the advantages without paying anything.
    2) forget about hte idea, risk legal liability, and drop from the partnership (we aren't 'registered' as a partnership, i don't know if you have to or not, we're just two college students running a small local business).
    3) i want to keep doing the business, but won't without protection. we operate as a partnership (again, this is all oral contract, he could just as easily say he's my employee or just helping me). however, everything is in my name : the (877) phone line, the accounts we use online, the cash management, the receipts for purchases, everything. part of our arrangement is basically that i understand business (kind of) and have money/skill, he has free time. we kidn of operate like i'm the manager and he does teh footwork (putting up fliers, etc). soooooooo, if he's unwilling to absorb half the cost of an LLC, and i want to lose my liability, is there a way i can just be like 'look man, if you won't do the llc, then i want to continue splitting profits 50/50, but i want you to transfer everything to your name, and to be the sole proprietor of hte business, and i will become your employee.

    i think that would work, right? maybe if i had him sign something saying he was the sole proprietor? i just won't operate with the potential risks here, we're sellign stuff on ebay for people and holding some expensive stuff, and i dont' want to have issues, and am more than willing to pay the LLC setup, but i doubt he'll be interested. the only options are to quit (bad), pay llc setup myself (bad, unless i can transfer it to FL and hold my apartment building in it...hmmmmmmmm not so bad if that's the case, actually would be preferable if that were the case), or switch to an employee of his sole proprietorship, and be paid like a 50/50 partner, continue doing most of the work, yet technically just be his employee.

    thanks in advance for any help

  9. #9

    Default Re: How can I be free of personal liability?

    nobody?




    well, i actually got to see a lawyer today. i didn't choose the lawyer, because i found out i could get free legal counsel at my uni, so i went and actually got to see the director of legal services.

    i was highly disappointed. he was like 'you should have insurance, that will take care of any issues if somethign breaks or gets messed up'. i ask him if it provides the zero personal liability of a corp/llc (knowing the answer was 'no'), and he says no, but says i should have insurance whether or not it's an llc, corp, or proprietorship/partnership.

    i think that's a dumb idea. why pay for an llc and an insurance policy? the llc IS my insurance policy. if something goes bad i dump the llc, right? seems redundant (in the case of this very low profit business) to have insurance on top of my llc, that, from what i understand, provides me with the personal protection that i need, and is 'insurance' in that if something goes wrong i can sacrifice the llc without much issues (is that how it goes? i'm obviously totally new to this)

    he then explained that he holds his business in a proprietorship, which made me feel that he wasn't too savvy. i dunno. at the end he says somethign to the effect of 'LLC's are only 5 years old here in MA, and i don't know much about them'. he basically couldn't tell me the differences or advantages of an llc over, say, a C corp.

  10. #10
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Re: How can I be free of personal liability?

    I don't know enough about your business. If you were to engage in personal misconduct, though, such as knowingly trafficking in stolen merchandise, incorporating wouldn't shield you from personal (or criminal) liability. If you turn a blind eye to such conduct by your partner, again the corporate shield may not prevent personal liability.

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