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Subject: Business insurance - yes, no -- maybe so? rss

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Herman Husband
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Are there any circumstances where business insurance would be needed for a mom and pop board game company? I am writing a business plan right now -- my business is setup as an LLC -- I know that does not erase all risk, but I am attempting to cover my bases -- thoughts anyone?
 
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Scott Pizio
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I'd speak to a lawyer and not an internet forum.
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Lee Valentine
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Business insurance is usually affordable if you are selling a reasonable volume of games. If you are producing just 500 units or so of a game, however, then it'll be really expensive, relatively speaking.

As an LLC, all sorts of screw ups can render your LLC's legal shield permeable. The more egregious your error, the more likely a court will look for reasons to "pierce the veil" between the LLC and you. Here are examples of how/when:

http://www.nolo.com/legal-encyclopedia/personal-liability-pi...

If you can, you should definitely carry business insurance. For $600 or so you can probably pick up a million in liability insurance.

You'll still need to pay the legal bills if you get sued. Consider this, you produce something that a kid chokes on. The parent says they weren't properly warned, and they want to sue you in your personal capacity. You CANNOT let this suit go unanswered or they'll get your personal assets. You have to answer the suit. Without insurance, you'd have to pay for expenses out of pocket even if you win. If your insurance covers litigation costs, however, then you might be totally covered for defending the suit.

If a court rules that the veil is not pierced, then you could probably admit fault and have the plaintiff just take your LLC and the games in your warehouse. The real trick is arguing, for tiny LLC, that the veil hasn't been lifted. It shouldn't be hard to prove if you ran your LLC like a real corporate-style business. If you ran it shooting from the hip, however, then you could blunder in some ways and be in for a world of hurt.

The LLC status alone is likely good enough a lot of things, but if you make a mistake and pierce the veil between you and the LLC, your home will be a bit safer with some insurance.

Lee
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Lee Valentine
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Also, check with a lawyer re: the LLC's capability to protect you against negligence/tort/personal injury. If you drop a crate on someone's foot they may sue you in your personal capacity. Injury insurance might cover your butt where an LLC might not.

Lee
 
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