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Structuring a small business to sell my designs

jhov

Cast Iron
Joined
Jun 5, 2020
Location
SW Ohio
I have a few designs that I'm in the process of prototyping in my home shop that I'd like to be able to manufacture and sell at some point. I've done enough research to suggest that starting an LLC is probably the best choice for starting a business for this purpose, but I'm still not decided how to structure things. Currently, all the shop and all equipment is my personal property and I'm considering a few different business structures:

  1. Continue to hold the shop and all equipment personally and lease it to the LLC.
  2. Create a holding LLC and subsidiary LLCs for each business purpose (manufacturing, engineering, etc..), and have the holding LLC hold the shop and all equipment.
  3. The same as the above but lease the shop and all equipment to the holding LLC.

If the business fails, I want to ensure the shop and equipment remain my personal property as it is all located in my garage. I don't plan to leverage any credit, so my risk of defaulting on loans is zero and I plan to carry liability insurance for any lawsuits that come my way. Given these facts, a holding LLC seems excessive and also a paperwork burden. Have any of you done something similar? If so, how did you structure things?
 
Remain a sole prop until size requires you to go S Corp.

If you own the house homestead it, no one suing wants your machines they want your house. Once that is protected you are practically 'lawsuit proof' until you actually start making money
 
Do a subchapter S to protect yourself from all lawsuits, and make sure to carry plenty of liability insurance. I would hold all assets personally and lease to the company if you want, but remember that you will need to pay taxes on those payments if they are more than $600 for the year.
 
My lawyer tells me that an LLC, with only one owner (or "Member") is not very "Lawsuit Proof".
 
I don't think Ohio has much in the way of Homesteading laws. At a glance, it can only be applied to 25k of value and only if you are a senior or disabled veteran. My wife and I would be equal owners and I would likely employ another family member if it were to become profitable. Sole proprietor doesn't sound like it offers much protection. I'll look into an S corp though.
 
It might be cheaper to deal with the house, as you are more likely to get sued if someone trips on your walk and gets bitten by your dog for lying on the lawn than anything business related

All this renting back and forth is overthinking IMHO
 
All advice given here is at best a starting point. And worth every penny you pay for it. Start with a CPA. Get a good insurance agent involved too. Shop around as well. CPAs offers a service. Insurance agent sells a product. Best to know the difference.
 
I plan to carry liability insurance for any lawsuits that come my way.

Product liability? Let me re-phrase your words up there for you.. "I plan to carry liability insurance
to encourage lawsuits".

You only get sued when you have something of value to take. Can't get blood from a stone.

General liability, different thing. For when a rafter crashes down and crushes the UPS guy.


If you are making a product that you plan on getting sued, there is no F'n way I would
be making that stuff out of a shop at my house, and I would bury it so deep in multiple
layers of corporations and LLC's that nobody would ever find me.
 
I was sued three times, no merit to any of the suits, but you still have to defend yourself.

The examples you gave weren't product liability which is what mentioned insurance covers (if I'm correctly following the bouncing ball). It's a different kettle of fish, potentially big US jury style awards, sleazy contingency fee litigators and easy to go after you personally. (and win if there was negligence).
 








 
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