If I choose to sell certificates for products or services that other companies will be providing, what business structure is necessary for this type of business?

What liabilities might I face? What would people sue me for?

Asked on October 1, 2014 under Business Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

There is no specific type of business structure which is "necessary"--it is always advisable, however, to run a business through an LLC (limited liability company) or corporation, to help protect you from any business-related debts or liabilities. (Of the two, an LLC is generally better for small business: it is more flexible and involves less paperwork.)

What could you be sued for? Potentially many things, such as:

1) If you don't have the right to sell certificates for the products or services of other companies, then the customers could sue you for fraud and/or breach of contract.

2) And if you don't have the permission of the other companies to sell certificates for their products or services, you could be sued by those companies for any of a number of things, such as unfair competition, trademark (or tradename or service mark) violation, or interference with economic advantage.

3) If you fail to deliver any thing you promise, that would be breach of contract.

4) If you cause injury to another person or business, you could be sued in tort for the damage or cost you cause; this could happen in many ways, ranging from physical damage (e.g. while driving somewhere for business, you hit another car or person) to reputational damage (you defame someone with something you say,. write, or post) to causing economic losses (you lose someone's account information and another person uses it to steal from the first person).


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