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  1. #1

    Default How Much Legal Protection Does an LLC Give to its Members

    Let's say I am starting a new small business, nothing major just hoping for a few thousand dollars in profit per year.

    The product is basically a lottery ticket with acts of kindness behind the scratch off area. I am looking at a worst case scenario where the customer's baby, cat, dog ect.. swallows the scratch off material and has some horrible reaction or even chokes and dies on the actual paper.

    Obviously the LLC has Limited Liability protection, does it apply in this situation?

    Am I being too overly cautious?

    Does anyone have a suggestion as whether or not to go with the LLC or Sole Proprietorship?

  2. #2
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: LLC and Lawsuit Liability

    An LLC doesn't protect you from your own negligent acts.

    If your product injures somebody you are almost guaranteed to be sued as an individual.

    Regardless of how you form your business the best way to protect yourself is to buy liability insurance.

    Unfortunately, people who start businesses on a shoestring don't want to pay for insurance. But when something goes wrong and you see your financial future going up in smoke, you'll wish you had bought it.

  3. #3

    Default Re: LLC and Lawsuit Liability

    Quote Quoting adjusterjack
    View Post
    An LLC doesn't protect you from your own negligent acts.

    If your product injures somebody you are almost guaranteed to be sued as an individual.

    Regardless of how you form your business the best way to protect yourself is to buy liability insurance.

    Unfortunately, people who start businesses on a shoestring don't want to pay for insurance. But when something goes wrong and you see your financial future going up in smoke, you'll wish you had bought it.
    Thanks for the reply, is there any possible way legal action could be taken by a baby choking on one of these cards? It just seems like this could be an instance with almost any item that has paper with it(Wedding Invitations, Picture Prints, Owners Manual ect..

    If I ordered a picture from Shutterfly and my child chokes on the picture, does Shutterfly have any legal obligation to this?

  4. #4
    Join Date
    Jun 2010
    Posts
    179

    Default Re: LLC and Lawsuit Liability

    You are over thinking it with the choking... You always risk getting sued in this country. It's the risk of being alive. Go ahead with your idea and try not to do anything stupid. It's the best you can do. I'd always go with a corp rather than sole-proprietorship. It's not this much money and it offers some protection. Not too familiar with LLCs but they are in some cases treated as sole proprietorships/partnerships AFAIK so corp is better.

    As for liability insurance, get some quotes. It could be as little as few hundred bucks. But you'll likely get 1M/2M aggregate. What if someone wins a judgement for more than this. Then you are on the hook for whatever your insurance didn't cover... It never ends...

  5. #5
    Join Date
    Mar 2013
    Posts
    18,340

    Default Re: LLC and Lawsuit Liability

    Quote Quoting gwencummings
    View Post
    Thanks for the reply, is there any possible way legal action could be taken by a baby choking on one of these cards? It just seems like this could be an instance with almost any item that has paper with it(Wedding Invitations, Picture Prints, Owners Manual ect..

    If I ordered a picture from Shutterfly and my child chokes on the picture, does Shutterfly have any legal obligation to this?
    Probably not. But it wouldn't stop you (or anybody) from suing Shutterfly.

    That's the point.

    The cost of defending a lawsuit can be astronomical even if you win.

    I was a private investigator for several years. Risky business, right? Well, I operated as a sole proprietor and bought a million dollars worth of liability insurance. I never lost a bit of sleep about what might happen.

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