5 ms·

At one point you just go fuck it, it's a side project. Just wrap it in a LLC so it can't bankrupt you even if you do get sued. From experience: this is dangero

by buu700 8y ago

At one point you just go fuck it, it's a side project. Just wrap it in a LLC so it can't bankrupt you even if you do get sued. From experience: this is dangerous and completely wrong advice. The corporate veil can be pierced if the LLC is determined to be an "alter ego" of the individual, which isn't a difficult argument for a one-person side project.

pc86 8y ago
That's the point they're making. "Fuck it, it's a side project" acknowledges that it's not the right move, but that it's too onerous to do things the way they should be done. So you risk it and hope you have the time and money to fix it later before it becomes an issue.
- buu700 8y ago
  I get the point, but I wouldn't want anyone reading that and taking the conclusion seriously. Forming an LLC in that case is pretty much a waste of time and money that offers a false sense of security.
  - mbesto 8y ago
    > Forming an LLC in that case is pretty much a waste of time and money that offers a false sense of security. Pro tip to people reading this, don't take generic advice about something that might have financial/legal implications...consult a lawyer/accountant.
    - buu700 8y ago
      Definitely retain counsel no matter what for anything important. I'm just saying I'd be surprised if there were a situation in which a lawyer would advise that registering an LLC is reasonable protection from all legal repercussions of your solo side project.
      - mcbits 8y ago
        But would a lawyer ever advise against forming an LLC for a side project that might have liabilities, or just advise on the best language and jurisdiction? To me there is a big difference between "if you really screw up, they could try to pierce the veil and go after you personally" and "if you do everything right and your business still fails, you're automatically personally liable."
        buu700 8y ago
        Probably not. I'm not saying "don't form LLCs" — it's probably in itself a good idea for any slightly serious project — but rather that it isn't a substitute for complying with the law. I say this from experience because I once made exactly that mistake (formed an LLC that was otherwise unnecessary specifically to protect against potential legal consequences of a side project, only to find out from a Google Alert six months later that a lawsuit had been filed against me personally).
        ccostes 8y ago
        > find out from a Google Alert Does this mean there was an article or something online before you were contacted about the lawsuit?
        buu700 8y ago
        Yep, that one was an interesting surprise.
        riku_iki 8y ago
        I am very curious what lawsuit was about..
        buu700 8y ago
        https://news.ycombinator.com/item?id=5547151 https://news.ycombinator.com/item?id=5547151 https://techcrunch.com/2013/04/14/napster-fm-is-an-open-source-social-music-player-that-can-be-hosted-by-anyone-in-case-of-shutdown https://techcrunch.com/2013/04/14/napster-fm-is-an-open-sour... https://www.law360.com/cases/52953cd03fdd847f5200a5c8 https://www.law360.com/cases/52953cd03fdd847f5200a5c8
    - XCabbage 8y ago
      Except that, realistically, most people aren't going to consult a lawyer or accountant for a small side project. I don't even really know how to hire a lawyer or accountant, or how to assess whether the person I pick is minimally competent to give me good advice, and I don't want to burn a few grand of my own money on a zero-revenue hobby project to guard against risks that will probably never materialise anyway. So instead, I'd chance it.
      - canadapups 8y ago
        > I'd chance it. Without consulting a lawyer, you don't know what you are chancing. I hardly call that a good bet. Not knowing how to get a lawyer or accountant is not a good excuse for not consulting one. If you consult a lawyer for 1 project, you do learn from the lawyer and become a bit more knowledgeable for the next project and may not need to consult a lawyer a second time if the new project is similar.
        jschwartzi 8y ago
        Maybe you could explain how to consult a lawyer or accountant instead. That would actually be really helpful for a lot of people who have never needed to retain a lawyer or accountant, don't know what to look for, and have no idea where to even begin to do so.
        canadapups 8y ago
        ok, good suggestion. Step 1 - Find a Lawyer: 1a. Ask people you know. For example, if at a company, maybe you can ask the legal dept for a referral for your personal project. Lawyers know lawyers. Even a divorce or real-estate lawyer will know other lawyers in different specialties or reputations of firms. Ask bankers, dentists, any small business people, etc. - they use lawyers too. 1b. Use Google. Call 5 lawyers and setup a meeting to meet them. Step 2 - Interview them: Interview them like you interview any potential employee. What is their experience with small IT projects? Are you small potatoes to them? What are their fees? Do they have legal associates to do the grunt work for cheaper than a legal partner (partner will still review and be responsible)? What do they suggest you to do for your side project? Ask why to see if they can explain themselves well. How well do you communicate with them? Do they respond to your emails or telephone calls quickly? Do they have other partners who can cover for them when they go on holidays or are busy with other urgent cases? Can they let you do some of the work such as incorporating and registering a trade name because it is easy (to keep legal fees low)? Step 3 - Evaluate them: As they work, get them send you all their documents. Read the legalese and ask more questions. Do they still explain themselves well. How long do they take to do the work? Attention to detail is important. If their work sucks or you don't communicate well with them go find a new lawyer.
    - nraynaud 8y ago
      I am so skeptical of this advice, I have been burned by accountants too.
    - canadapups 8y ago
      Amended pro tip: consult a lawyer + accountant... and get business insurance.
      - rv-de 8y ago
        And then there is no money left for the actual project.
        gamblor956 8y ago
        If it's just a side hobby, why should you be getting the benefits of limited liability? The whole point of limited liability is to protect business investment, not hobbies. And yes, that is the reason that CA charges $800 for LLC registration. Because if $800 is too big of an expense...then you're not running a business.
    - gamblor956 8y ago
      Pro tip as someone who has experience in LLC-busting litigation: an LLC for an individual side project is totally a waste of time and money. In order to maintain the separation of liability, you need to maintain separate bank accounts, financials, everything.
    - deleted 8y ago
      [deleted]
zawerf 8y ago
I never actually made it to this step because it costs $800 to form a LLC in california. I went with a more futile attempt to do everything anonymously, pay hosting with bitcoins, etc. But this is basically impossible from an opsec point of view (which should restore some faith in the legal system in the sense that I never figured out a way to opt out of it). Subpoenas[1] basically cost nothing(<$100) for your typical lawyer to issue. Everything you touch will very eagerly give up all your info when subpoenaed (e.g., your typical domain registrar will spew your name, address, payment information, ip addresses logged in from, etc). [1] https://en.wikipedia.org/wiki/Doe_subpoena https://en.wikipedia.org/wiki/Doe_subpoena
- graphememes 8y ago
  Form your LLC in another state. California is absurd. Form it where it makes legal sense, not where you reside. You can also get a forwarding address there as well. It also would be in your benefit to follow the laws of that area as well.
  - ryandrake 8y ago
    Not a lawyer but this does not sound like good advise. If you live in California, and the people working on the business are in California, California may decide you have a nexus here and that you’re subject to the tax.
    - graphememes 8y ago
      Always consult your lawyer first. There are many reasons for doing the above. However, it's whatever is in your best interest and also field others for advice. You want a quorum.
  - gamblor956 8y ago
    If you live in California, forming an LLC in another state just means that you are now paying that other state, and California. You also get the joy and privilege of filing two state income tax returns. Oh, and the real kicker is that you're now subject to being sued in either state.

by buu700 8y ago

pc86 8y ago

That's the point they're making. "Fuck it, it's a side project" acknowledges that it's not the right move, but that it's too onerous to do things the way they should be done. So you risk it and hope you have the time and money to fix it later before it becomes an issue.

buu700 8y ago
I get the point, but I wouldn't want anyone reading that and taking the conclusion seriously. Forming an LLC in that case is pretty much a waste of time and money that offers a false sense of security.
- mbesto 8y ago
  > Forming an LLC in that case is pretty much a waste of time and money that offers a false sense of security. Pro tip to people reading this, don't take generic advice about something that might have financial/legal implications...consult a lawyer/accountant.
  - buu700 8y ago
    Definitely retain counsel no matter what for anything important. I'm just saying I'd be surprised if there were a situation in which a lawyer would advise that registering an LLC is reasonable protection from all legal repercussions of your solo side project.
    - mcbits 8y ago
      But would a lawyer ever advise against forming an LLC for a side project that might have liabilities, or just advise on the best language and jurisdiction? To me there is a big difference between "if you really screw up, they could try to pierce the veil and go after you personally" and "if you do everything right and your business still fails, you're automatically personally liable."
      - buu700 8y ago
        Probably not. I'm not saying "don't form LLCs" — it's probably in itself a good idea for any slightly serious project — but rather that it isn't a substitute for complying with the law. I say this from experience because I once made exactly that mistake (formed an LLC that was otherwise unnecessary specifically to protect against potential legal consequences of a side project, only to find out from a Google Alert six months later that a lawsuit had been filed against me personally).
        ccostes 8y ago
        > find out from a Google Alert Does this mean there was an article or something online before you were contacted about the lawsuit?
        buu700 8y ago
        Yep, that one was an interesting surprise.
        riku_iki 8y ago
        I am very curious what lawsuit was about..
        buu700 8y ago
        https://news.ycombinator.com/item?id=5547151 https://news.ycombinator.com/item?id=5547151 https://techcrunch.com/2013/04/14/napster-fm-is-an-open-source-social-music-player-that-can-be-hosted-by-anyone-in-case-of-shutdown https://techcrunch.com/2013/04/14/napster-fm-is-an-open-sour... https://www.law360.com/cases/52953cd03fdd847f5200a5c8 https://www.law360.com/cases/52953cd03fdd847f5200a5c8
  - XCabbage 8y ago
    Except that, realistically, most people aren't going to consult a lawyer or accountant for a small side project. I don't even really know how to hire a lawyer or accountant, or how to assess whether the person I pick is minimally competent to give me good advice, and I don't want to burn a few grand of my own money on a zero-revenue hobby project to guard against risks that will probably never materialise anyway. So instead, I'd chance it.
    - canadapups 8y ago
      > I'd chance it. Without consulting a lawyer, you don't know what you are chancing. I hardly call that a good bet. Not knowing how to get a lawyer or accountant is not a good excuse for not consulting one. If you consult a lawyer for 1 project, you do learn from the lawyer and become a bit more knowledgeable for the next project and may not need to consult a lawyer a second time if the new project is similar.
      - jschwartzi 8y ago
        Maybe you could explain how to consult a lawyer or accountant instead. That would actually be really helpful for a lot of people who have never needed to retain a lawyer or accountant, don't know what to look for, and have no idea where to even begin to do so.
        canadapups 8y ago
        ok, good suggestion. Step 1 - Find a Lawyer: 1a. Ask people you know. For example, if at a company, maybe you can ask the legal dept for a referral for your personal project. Lawyers know lawyers. Even a divorce or real-estate lawyer will know other lawyers in different specialties or reputations of firms. Ask bankers, dentists, any small business people, etc. - they use lawyers too. 1b. Use Google. Call 5 lawyers and setup a meeting to meet them. Step 2 - Interview them: Interview them like you interview any potential employee. What is their experience with small IT projects? Are you small potatoes to them? What are their fees? Do they have legal associates to do the grunt work for cheaper than a legal partner (partner will still review and be responsible)? What do they suggest you to do for your side project? Ask why to see if they can explain themselves well. How well do you communicate with them? Do they respond to your emails or telephone calls quickly? Do they have other partners who can cover for them when they go on holidays or are busy with other urgent cases? Can they let you do some of the work such as incorporating and registering a trade name because it is easy (to keep legal fees low)? Step 3 - Evaluate them: As they work, get them send you all their documents. Read the legalese and ask more questions. Do they still explain themselves well. How long do they take to do the work? Attention to detail is important. If their work sucks or you don't communicate well with them go find a new lawyer.
  - nraynaud 8y ago
    I am so skeptical of this advice, I have been burned by accountants too.
  - canadapups 8y ago
    Amended pro tip: consult a lawyer + accountant... and get business insurance.
    - rv-de 8y ago
      And then there is no money left for the actual project.
      - gamblor956 8y ago
        If it's just a side hobby, why should you be getting the benefits of limited liability? The whole point of limited liability is to protect business investment, not hobbies. And yes, that is the reason that CA charges $800 for LLC registration. Because if $800 is too big of an expense...then you're not running a business.
  - gamblor956 8y ago
    Pro tip as someone who has experience in LLC-busting litigation: an LLC for an individual side project is totally a waste of time and money. In order to maintain the separation of liability, you need to maintain separate bank accounts, financials, everything.
  - deleted 8y ago
    [deleted]

zawerf 8y ago

I never actually made it to this step because it costs $800 to form a LLC in california. I went with a more futile attempt to do everything anonymously, pay hosting with bitcoins, etc. But this is basically impossible from an opsec point of view (which should restore some faith in the legal system in the sense that I never figured out a way to opt out of it). Subpoenas[1] basically cost nothing(<$100) for your typical lawyer to issue. Everything you touch will very eagerly give up all your info when subpoenaed (e.g., your typical domain registrar will spew your name, address, payment information, ip addresses logged in from, etc). [1] https://en.wikipedia.org/wiki/Doe_subpoena https://en.wikipedia.org/wiki/Doe_subpoena

graphememes 8y ago
Form your LLC in another state. California is absurd. Form it where it makes legal sense, not where you reside. You can also get a forwarding address there as well. It also would be in your benefit to follow the laws of that area as well.
- ryandrake 8y ago
  Not a lawyer but this does not sound like good advise. If you live in California, and the people working on the business are in California, California may decide you have a nexus here and that you’re subject to the tax.
  - graphememes 8y ago
    Always consult your lawyer first. There are many reasons for doing the above. However, it's whatever is in your best interest and also field others for advice. You want a quorum.
- gamblor956 8y ago
  If you live in California, forming an LLC in another state just means that you are now paying that other state, and California. You also get the joy and privilege of filing two state income tax returns. Oh, and the real kicker is that you're now subject to being sued in either state.