Ask HN: Separate liability by multiple LLC's? | Hacker News Reader

Ask HN: Separate liability by multiple LLC's?

6 pointssoftwarefounder3 comments

I run my own consulting practice. It's just me at the moment. It's filed as an LLC.

I want to create a SaaS product, so I filed for another LLC which will house/own the product.

I am keeping both LLC's totally separate. There is no parent LLC. I want liability to be separate so that a law-suit against my consulting practice doesn't effect my product, and visa-versa.

I also like the idea of keeping it separate, since in time I could sell my product/company, and keep my consulting practice.

This creates more overhead, but almost guarantees separate liability.

What are your thoughts on this? What have you seen in the industry? I'm finding that the overhead is kind of annoying, especially some of the cross-over. i.e. if I hire someone for my product, but in a lull want to contract them to a client, that could be interesting. Also, until my product takes off, I'm just using the existing infrastructure that I bought under my consulting practice (i.e. laptop, email, office365, MSDN subscription, etc.)

The limited liability of corporations is not absolute. See, for example:

https://en.wikipedia.org/wiki/Piercing_the_corporate_veil

And specifically, for US corporate law:

https://en.wikipedia.org/wiki/Piercing_the_corporate_veil#Un...

This article notes:

"In the United States, corporate veil piercing is the most litigated issue in corporate law. Although courts are reluctant to hold an active shareholder liable for actions that are legally the responsibility of the corporation, even if the corporation has a single shareholder, they will often do so if the corporation was markedly noncompliant, or if holding only the corporation liable would be singularly unfair to the plaintiff. In most jurisdictions, no bright-line rule exists and the ruling is based on common law precedents."

Thus, before spending a lot of effort on setting up two LLCs, you should probably talk to a lawyer to see if this would give you any added protection in your situation.

If I may ask you a question: I'm considering setting up an LLC for commercial operation of a few small projects I've been working on. How did you go about setting yours up, and what have been your experiences with this? Are Registered Agent fees expensive? I'm not expecting to make much money, but I want the liability shield.

I'm not the OP but I did create an LLC. I personally used LegalZoom to incorporate in Illinois. Some states have as low as $25 filing fee (from what I've heard) so services like LegalZoom may not be worth it. All in, it cost about $750 for everything. The main thing to keep in mind is to keep money separate when it comes to an LLC. The moment you intermingle your funds is the moment you lose your liability shield. I have a business account that everything business related goes through and if I need to use personal money to fund something I write a check to my business as a loan and let the business buy it. It can become a hassle but it is worth it to keep the protections that come with an LLC.

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