LLC vs sole proprietorship for online business

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LLC vs sole proprietorship for online business

I sell hand knits through my etsy shop. I am currently structured as a sole proprietorship but I’m thinking of changing to an LLC to provide protection against lawsuits. Is this a good idea or could I accomplish the same thing by getting product liability insurance?

Asked on December 21, 2016 under Business Law, Pennsylvania

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Do both. Having a limited liability company (LLC) will provide you with considerable (but not absolute) protection against many or most forms of company-based or -derived liability: e.g. for breaches of contract, from disatisfied customers, from company debts (unless you personally guaranteed them), etc. It does not protect you from debts, judgments or obligations based on things you *personally* do, like again, if you personally guaranty any obligations, or if you somehow personally injured or defamed someone in the course of working. So you also have insurance--to both protect you personally from liability where the LLC structure does not, and also to help protect the LLC, which is important to you (a source of income; something you have invested time, effort and presumably  money int; etc.).


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