
Why you should probably have an LLC for side projects - conesus
http://stu.mp/2010/09/why-you-should-probably-have-an-llc-for-side-projects.html
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tptacek
I think it's handy to have an LLC set up for a number of reasons, but the
point raised in this blog post isn't one of them.

Corporate protection from personal liability is extremely valuable for
contracts, and especially to protect you from your company's creditors. It
does _not_ however automatically shield you from liability to negligence
claims, and, more generally, from tort claims of all sorts.

One reason you don't hear about this very often is that established businesses
tend to maintain liability insurance, and in practice people sue with the
intention of recovering money, and what they're targeting with those suits is
the company's insurance.

This might be a good argument for buying professional liability insurance ---
and, indeed, all contractors should (and probably have to, as a contract
term). But for your open source side project, it's a moot point; use any well-
known open source license and your users are already conceding a disclaimer of
warranty and limitation of liability as a term of using your code.

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gte910h
You still run the risk of being sued open source or no.

I don't think the shield of LLC liability or open source license disclaimer
will necessarily help the guy there (as people can still personally sue him),
but I can't see it hurting.

It's also important to distinguish between liability and errors and omissions
(what tptacek called professional liability insurance). Make sure if you do
buy insurance, it's the right type. Each type protects you against claims only
of a certain type.

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tptacek
Forming an LLC won't hurt you. It will help with other things. But it will do
nothing to address the legal risk this guy is talking about.

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gte910h
Yes, that's what I just said...

> _I don't think the shield of LLC liability or open source license disclaimer
> will necessarily help the guy there_ (as people can still personally sue
> him), but I can't see it hurting.

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ams6110
I'm sure things vary state to state, but where I am you can form an LLC online
at the Secretary of State website in 10 minutes, for about $100.

A couple of things I've been advised by my attorney (not that I'm giving
anyone else legal advice...)

If you form an LLC but then don't operate it "seriously" (keeping records,
having written articles of organization, etc) a court may nullify your
"limited liability" protection.

The author states that "Unfortunately, the US is a litigious country and any
idiot can sue you for anything." and while technically true, in practice it's
not that easy. Outside of small claims, you can't file a civil complaint
unless you hire an attorney, and in most civil litigation each side pays their
own fees. There may be exceptions for gross negligence but that would be
pretty hard to prove in a contract dispute for software development. So unless
a fairly substantial amount of money is at stake it's not going to be worth
doing. No good lawyer is going to bring a lawsuit that costs his client more
than he can recover, and you also have to take into consideration the ability
of the other party to pay (an LLC that has assets comprising a laptop computer
and a few thousand dollars in the bank is not going to be a target for any
litigation).

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georgemcbay
In California there is a minimum $800 per year tax on all LLCs regardless of
whether or not you made any money from the venture, so that kind of nullifies
the potential benefits for most people, IMO.

$800 is a very real cost and the chances of anyone suing you over a side
project are so incredibly remote that a $800/yr insurance policy versus being
sued is severely -EV.

YMMV in other states.

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sahillavingia
Just created an LLC for this purpose, as well as combining all of my side
projects under one brand.

It costs a significant amount, and I'll soon see if it's worth it...

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greg_holsclaw
The costs associated with starting an LLC vary from state to state, but
usually side jobs don't rise to level of needing liability insurance. If your
side project is big enough to be a lawsuit target, then it isn't a side
project anyway. Build it into something more, and form an LLC, or just get
some kind of business/manager's insurance.

