legal liability
I posed this to the taig group but I wonder if anyone here an provide additional information.
In this day and age with lawsuits abounding. Has anybody looked into
protecting yourself from legal action for the products that you
made/make? I'm getting ready to sell a product which if defective
could cause personal injury property damage (but what products
couldn't). Can anyone recommend how to go about protecting myself
from money hungry people?
Thanks
Mark
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In the auto industry we has garage liability insurance that helps protect us. But the only way to protect your self is you got to talk to a shark (lawyer). One that handles product liability would be best. Your insurance rep could help if they sell that stuff, mine got me pointed in the right direction when I needed help.
Sorry I could not be more help.
Good question. I don't think there is any surefire method of sheltering yourself, otherwise, unscrupulous manufacturers would be taking advantage of it. Not only do we want protection, but we also want to sue others who are negligent in making their products.
You should really talk it over with a lawyer. You might have to give title to your main assets to someone who won't put you out on the street....oh ya, your wifePerhaps form a limited company with only yourself as the director. You'll have to risk whatever assets you and your company owns to back your products.
Getting liability insurance is not too difficult, at least until the first court case.
You must do your utmost to make the widget as good as you can, with quality control and testing to ensure that the "dangerous part" is as well made and as safe as can be reasonably expected. You might also hire an outside engineer to give some kind of an idea of whether your design is good. Most likely, none of them would be willing to go on the hook for you either.
First you get good, then you get fast. Then grouchiness sets in.
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)
Check into LLCs
Limited Liability Companies
Not just for the big guys anymore.
I looked into it for a medical device I had an idea for. The insurance co wanted 30k per year. Depends a lot on exposure I think, like the insurance coverage for someone who makes a frying pan might be less than someone who makes a spine implant.
In the end if someone wants to come after you and your capital investments, and they have cash to pay a lawyer, you will be in a world of hurt money wise regardless of if you did something wrong or not.
The costs to defend yourself can be crippling. LLCs only protect you so far, and putting things in the wifes name only works in certain states.
In AZ when a doctor is sued for malpractice his wife is sued as well, same goes for business suits. Some guys I know have all of their assets listed in their mothers name, or childrens name as part of a living trust, that seems to be the best way I've seen.
Damn lawyers have made it hard for everyone.
Don't get me started.....
Damn lawyers have made it hard for everyone
If hell ever post a no vacancy, thank attorneys , please notice the absence of any smiley face icon here !
These people may be able to give you more information on this subject.
http://www.small-business-forum.com/
Mark
DMG Designs
League City, Texas
I went through this on something I did.
In the end I did this.
Formed an S-Corp.
Had the lawyer write up a legal disclaimer.
As mentioned, insurance was stupid expensive.
My last for of defense has been to build the product as best as possible.
I did much testing using myself as the victim first, with no issues.
Agreed. There's not much you can do to prevent laywers from getting their daggers in you. (And we've got one running for VP, greeeeat).
No matter what you do, someone will use it wrong and you won't have labeled it specifically for that form of stupidity/ignorance, and you'll get sued. (Did you know over 100 people DIE each year from choking on ball point pens? Yea, there's plenty of stupidity out there, and some are just barely smart enough to find an unscrupulous lawyer to try to take you to the cleaners.)
Good luck.
Matt
San Diego, Ca
___ o o o_
[l_,[_____],
l---L - □lllllll□-
( )_) ( )_)--)_)
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)
broken003 it is called product liability insurance and as others have said form a llc or an s corp. LLc are much more simple but I am not sure how much protection they afford. I am in the firearms industry and the largest trade show we have is the Shot Show. There is always a representative there from the product liability people. It is base on your yearly sales.
Mike
edited to add: I forgot to mention that after reading your post I dia a search on Google and found 2,060,000 references to "product liability insurance"
Seems like the lawers have lots of people interested!
No greater love can a man have than this, that he give his life for a friend.
what are the rough costs to for an S-corp or to setup an LLC? How about cost to have a lawyer write up a legal disclaimer?
I really wanted to just sell a few things to help support the shop but I realize there is inherent danger in almost every product. The item I'm working on isn't inherently dangerous but anything misused could be.
Its unfortunate that its not easier for a small time hobby to make a little side money. I (being logical) don't see why anyone could sue you if you had them sign a contract saying that they absolve you of all responsibility related to your product and they are agreeing to be responsible for all issues related to the use of your product. But I know that nothing can stop you from getting sued...how ridiculous
The cost of setting up an s corp will be more than an llc. Most of the cost will be the lawyers so don't tell them ahead of time what you really think of them!
Just out of curiousity can you reveal what it is you are making without giving away any secrets??
Some products are inherently more liked to be misused than others. I make gunstocks and the product liability for products would be considerably less than, say, for a shop making a fully function firearm. Same is true for automobiles. The cost of insurance for a company making hoods or other trim parts for automobiles will be much less than that of the makers themselves.
Mike
ps My s corp that I started to set up would have cost me around $600 legal and about $100-200 regristration fees which are paid to the state.
No greater love can a man have than this, that he give his life for a friend.
Originally Posted by turmite
The cost of setting up an s corp will be more than an llc. Most of the cost will be the lawyers so don't tell them ahead of time what you really think of them!
Just out of curiousity can you reveal what it is you are making without giving away any secrets??
Some products are inherently more liked to be misused than others. I make gunstocks and the product liability for products would be considerably less than, say, for a shop making a fully function firearm. Same is true for automobiles. The cost of insurance for a company making hoods or other trim parts for automobiles will be much less than that of the makers themselves.
Mike
ps My s corp that I started to set up would have cost me around $600 legal and about $100-200 regristration fees which are paid to the state.
I formed an LLC. About $700 in legal and other fees. Also asked about
liability insurance. My attorney told me that basically I was too small.
No attorney would bother going after a shop with a tens of thousands
in assets. Not worth their time!
A former customer is a very succesful, small mtorosports accessory
manufacturerer. They were so succesful, that they were bought up
by an $11M company. The lawers had them stop all production and sales
in a matter of days! Liability is not practical for them, and they became
an instant target. They were sold to become independant very quickly
and went back into business.
Bottom line, there is danger in numbers. Safety in staying small.
Secondly, if you only build to customers prints, there is not much risk.
YMMV
Pete
but if I understand correctly, the reason for forming the LLC (besides tax issues) is that your personal assets are seperate from those of the LLC?
That's what I did it for. The assets in the company are seperate from your
personal assets. And you NEVER mingle the two after that.
Seperate accounts for personal and business, everything is seperate from
that point on. Or you loose the purpose of creating it.
And you need to keep i tclear that you are representing the LLC not yourself
personally.
Disclaimer. I am not a lawer, I don't even look like one.
Pete
I don't know that the directors of an LLC are really "limited in liability". Typically they are not, because a legal action will be brought against your company name, your name, your wife and your dog.
Limited liability really protects the common shareholders, if they are not the directors. It is the simple investor who enjoys the protection. That's my opinion.
First you get good, then you get fast. Then grouchiness sets in.
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)
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