Author Topic: Protecting your personal stache from your side hustle - to incorporate or no?  (Read 1276 times)

aes421

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Hi all,

My husband and I are looking to get into a niche business selling custom made accessories for a game (think similar to DnD custom figurines).
We have no experience running or setting up businesses so I was wondering how you keep your stache protected incase the business gets sued?   I don't think we should run into any problems, but I'm always worried about getting hit with a lawsuit even though everything we would make is custom and would not compete with any products the game makes.

I've read a bit about keeping separate bank accounts and setting up an LLC, but is that enough to protect my stache?  We are in the state of Mississippi so I was reading that the only LLC fee is a $50 filing fee.  If we did create an LLC would it be best to do it jointly or just under one of our names?

pk_aeryn

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I can’t answer any questions about starting a business but have you consulted any lawyers about how kosher your accessories are?  Companies are so protective of their IP even if you don’t think you’re in competition, they may not see it that way if you’re making money related to their IP.

Chris @ Saturday Financial

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I’ve heard advice to make your first $5,000, and then set up your LLC, etc. (I think it was was Paula Pant who said/wrote that.)

It seems like decent advice because you can test out your market before spending a lot of time and a considerable amount of money setting up the structure of a business just to find out you don’t really like it or that it’s much harder than you thought to get it off the ground.

The likelihood of getting hit with a lawsuit before your business has really taken off is super low. The risk is there, but it’s more likely you’d get something like a cease and desist letter - if that were to happen, you could just cease and desist and be glad that you didn’t waste your time setting up an LLC.
« Last Edit: November 10, 2019, 02:21:26 PM by Chris @ Saturday Financial »

Proud Foot

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Definitely visit a lawyer first. An LLC is very low cost to set up and can be beneficial, but you will also want to make sure you have appropriate insurance coverage for the business. I agree with Chris that you will most likely get a cease and desist letter before a lawsuit if a company feels like you are infringing on their IP.

legalstache

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Setting up an LLC would provide something of a buffer between your stache and your side business activities. That said, there is a legal doctrine called "piercing the corporate veil" in which a court sets aside the protections of the LLC and holds you personally responsible in certain scenarios.

In practice (at least in my state), the threat of corporate veil piercing means many people end up paying out of pocket to defend their LLCs in lawsuits, so the LLC is sometimes of limited utility. That's where insurance can be helpful, as others have mentioned.

 

Wow, a phone plan for fifteen bucks!