Do I need an LLC AND liability insurance?

UPDATED: Oct 1, 2022

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Do I need an LLC AND liability insurance?

I am an Archer. I shoot target competition. I am going to start building bows for
sale. Do I need liability insurance in case someone does something stupid and
hurts someone. Do I need an LLC? which costs 800 annually.

Asked on December 28, 2017 under Personal Injury, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

1) You would not be liable for what the user does with the bow. You could be liable if the bow is defective (e.g. you do not properly laminate any wood used in its construction, or the bow limb geometry is wrong, putting too much strain on the bow, or you use flawed materials, etc.) and it snaps mid-draw or otherwise breaks and injures a person. That is, you may be liable for what you do in design and construction, but not for what someone else does with your product.
2) Therefore, yes--you should have liability insurance.
3) You should have an LLC. 
a) Having an LLC insulates your personal assets (e.g. house, car, money in the bank) from most business-related debts or liability (it's not 100% protection, but it is very good protection). Thus, if there was a product liability suit and it exceeded your insurance, you would still be personally protected from it--only the business, not you, would have to pay.
b) Under the new tax law, it appears that "pass through" entities like LLCs get some favorable tax treatment (possibly a 20% deduction). Also, having a separate LLC (and keeping it funds, costs, etc. fully separate from yours) will facilitate deducting business expenses.
c) The LLC-fees are themselves tax deductible business expenses, reducing their effective costs.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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