Why you should probably have an LLC for side projects
stu.mp
stu.mp
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.
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.
>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.
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).
$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.
It costs a significant amount, and I'll soon see if it's worth it...