I am thinking for insurance and liability reasons of becoming an LLC. In these times every one wants to sue somebody:(. I don't want to lose my house because some dirt bag drops a hot steak on his foot while using one of my BBQ forks or flippers:o. What have others done? I have to do something because I am at the point were this is changing from a money making hobby into a full time job. I do blacksmithing, fabrication, small scale welding, knife sharpening and repair. So I think it is time.

THE BURDENS THAT COME WITH PROGRESS !
CONGRADULATIONS ! YOU HAVE ARRIVED.
[i have no idea how to answer your question] :(

when i moved my shoe repair business to a shop at home i got liability ins.so i included my blacksmithing into the package.like you it has gone from a hobby to a business.near here a woman was in a ma and pa grocery store,said she was bit by a spider looking at the bananas.now they are being sued,one reason there wasnt any signs warning of the dangers involved buying fruit.this made the store negligient.i hope nobody gets bit by a mosquito at my place you never know ,Nile Disease,Malaria.... i cant afford not to have it.

My business is an Inc. here in Canada, On top of separating me personally from liability, it also has Tax benefits.

Not sure how it works in the US but I know it saves me $.

Dave,

I do not think that opperating under a DBA (Doing Business As) will offer any liability protection to you. You pretty much are stuck with a Limited Liability Company (or is it Corporation?) or forming a bona fide corporation, if you want to avoid personal liability. Corporations have their own set of problems, like having to give up control of your business to a governing board. I suggest you take your concerns to both an accountant who specializes in business and corporate tax law and a lawyer with the same specialty. Another source of information is the public library.

~Bruce~

Hey Dave,

I'm a sole proprietor and just carry liability - much simpler on the bookeeping end. If a sharp lawyer wants to get to you even behind an LLC, they'll find a way of doing it

B. Norris is right - corps involve a whole other level of organization (at least here in Washington) and you should definitely seek out profession advice before doing it.

Here is the definition, note the last line:

"An LLC has some characteristics of a corporation, but it is not one. It does offer some of the benefits of a corporation, particularly the limitation of an owner's liability. An LLC provides lawsuit protection, credibility, tax savings, deductible employee benefits, asset protection, anonymity, the ease of raising capital, creating a separate legal entity for personal protection, an LLC has a broad range of powers beyond that of a sole proprietorship, small claims court benefits, separate liability for corporate debts, and perpetual duration. When you form an LLC you create a separate legal person and you are a shareholder. LLCs are preferred because they combine the limited liability protection of a corporation and the pass through taxation of a or partnership. The downside to an LLC is that it does not offer the free transferability of ownership, perpetual existence, and the ability to be owned by a single individual."

I have been involved in two LLC ventures. The one I am dissolving right now simply costs me franchise tax every year and doesn't provide any real benefit. Nothing can prevent you from being sued but usually the limit will be on the assets of the company. That scenario potentially means you put all your tools into the business and lose them in a court fight. BTW, homeowner's insurance will seldom protect you in this situation - if you are worried, obtain a small insurance policy and call it good. If you get sued, the opposing attorney will likely be aiming at a settlement from that.

I'm not an attorney or accountant but I sometimes play one on TV - plus I stayed at a Holiday Inn last night...:-)

I talked with a lawyer and he has suggested the route of LLC. for the differnt things I am involved with plus good liability insurance policy. It sucks but it is worth the cost of being my own boss. The LLC. could even rent its tools and equipment from me;) , the lawyer is looking into that. The last 5 companies I have worked for have been LLCs.

There are many unique situations, but there are potential benefits to a regular corp. or an S corp. over an LLC. I believe some accountants like to set up LLC's because it's simpler and takes less time, but it may be worth the time to discuss the pro's and con's.

Good luck with it, Craig

I have a degree in accounting........Corporations, S Corps, LLC's etc, are usually tax accounting devices...if you are a one man shop, it doesn't really matter what type you use for liability purposes...they will sue the corp, company, shop, you the individual, and anyone else whose name they can find. So you have the question of tax savings..if any...and liability issues...2 distinct issues. For a one man shop, if you are extremely profitable, tax issues are more important than liability. For liability, do good work and consult the firm of Smith, Wesson, and Winchester.

and that is said only Very Slightly tongue in cheek

Edited June 1, 200818 yr by rthibeau

The problem with the corp owning (buying) equipment, is that the equipment is/are then assets wich could be attached. The whole point is that the corp is only liable to the extent of it's assets. In my state, I can build (manufacture) any thing I want, with no insurance, but if I go to a jobsite to install it, I need liability ins.

Nothing says the corp needs to own the equipment They can always pay you to use your equipment to make the items they sell and design.