Legal Question in Business Law in Virginia

Re: General Liability Insurance or LLC?

Liability insurance will cover you for claims within the terms of the policy. If a claim fell outside the scope of the policy, and you were a sole proprietorship rather than an LLC, your personal assets could be used to satisfy the judgment. Similarly, if you had insurance only up to a certain dollar amount and were subject to a claim with a judgment in excess of the amount covered by insurance your personal assets would be used to satisfy the amount in excess of that covered by insurance. In contrast, if you were a properly formed and managed LLC, any amount that your business was liable for in excess of insurance, or not covered by insurance, would not be recoverable against your personal assets but would have to be sought directly against the LLC.

With respect to whether or not you should opt for an LLC, I believe that you should meet with an attorney to go over your business plans and best select the organization structure that will work for you.

Re: General Liability Insurance or LLC?

Your question raises a lot of issues that could be usefully discussed in a lot of differnet directions.

So this can only be very, very general as an answer.

First, I will discuss creating a traditional corporation (Inc.) the same as an LLC. They will both have the same result. I usually recommend a traditional corporation (Inc.) as being cheaper and more familiar for people to work with (although it does involve more yearly housekeeping than an LLC).

If you have general liability insurance, the insurance company would pay for any losses, above the deductible IF the loss is covered by the insurance company.

It would not matter in that case whether you have a loss personally or from the business.

If you form an Inc. or LLC and you suffer a loss, you personally should be immunized from liability, but the company would not be protected. So if you had a lot of money in the company, the company would have to pay the loss or court judgment. BUT YOU PERSONALLY would be protected. You could not be asked to pay any money out of your own pocket (probably).

So in that case insurance is better, and a company really should have both protections.

The biggest problem with insurance is that ins co.'s specialize in finding an excuse not to pay if you suffer a loss. Because insurance can be very, very complicated you may think you are covered, but the situation that comes up slips through the cracks.

However, if you have insurance they would probably pay for an attorney to defend you if you were sued.

If you are an Inc or LLC, you CANNOT defend yourself in court. You MUST hire an attorney.

So if the ins co provides an attorney for you, that is an advantage.

Frankly, I cannot imagine a webiste simply recommending outdoor recreation ideas being sued, except for debts you incur but don't pay, or if someone says you are stealing their name or content.

The biggest problem is that if you get insurance you need to understand precisely what the ins co does and does not cover.

There might be lots of things that are not covered by the insurance that you might be blissfully ignorant of the danger.