Legal aspects of turning a hobby into a business?

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petemorgan(pmoskico)
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Legal aspects of turning a hobby into a business?

Post by petemorgan(pmoskico) »

i know quite of few folks on the site have graduated into an actual business and i am curious about the technical business aspects: insurance, LLC, ect.

I have sold exclusively to friends and friends of friends. and i have had almost every single client help with the lay-up of the skis so they had some involvement in the ski building.

I am worried that if someone gets hurt on my skis that they might come after me as being liable. especially if i sell to some random person off craigslist. although i am not mounting the skis, so maybe the shop that actually mounts the skis are liable?

if my skis break and someone gets hurt, that would be horrible, and i dont think that any of my friends would try to sue me, especially because they were involved in the building process. but what if they did?

i have had bindings rip out of commercially made skis, and one in-particular resulted in a enormous crash at high speeds, and lost ski 6000ft vertical from my car. (they were the infamous gotamas with the buddah that everyone and their mom had bindings rip out) the best the volkl did was replace the ski with another one, blaming who ever did the binding mount as the culprit. wow thanks volkl


as much as i hate uncle sam, and i would prefer my ski business to be on the down-low, what can people recommend to protect myself against this kind of bullshit?

is opening a non-profit kind of thing a good way to go?
troublemaker
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Post by troublemaker »

Well the best way to do it is to become a "S" corporation and get a General Liability Insurance Policy somewhere around 3-5 millon. Really the insurance policy wouldn't cost that much and becoming incorporated isn't that hard if you call the right people. The reason for becoming incorporated is if you get sued they can only sue you for what the corporation has, and not you directly. So your home and personal assets are safe.
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vinman
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Post by vinman »

I think a lot of wrestle with this. There is a pretty informative thread, perhaps a couple in the Après section. Take a look in there.
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Richuk
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Post by Richuk »

Is this really a journal?
skidesmond
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Post by skidesmond »

This is America where you can sue anyone for anything. You can't stop people from suing you but you can protect yourself. Defending a lawsuit could bankrupt you as well. (sorry for the doom and gloom) A LLC or S corp offers protection. But yea I know where you're coming from. I've looked at this myself. I hoped I could buy some kind of rider and add it to my home owner ins but no such thing exists. In my state (Taxachusetts) just setting up a company costs $500 a yr, every year. The price of Liability Ins (3-5mil) varies all over the map. The best you can do is get pricing. If your going to be making 10-20 pairs of skis a year, liability ins will take a good chunk of that profit. Add in other expenses such as taxes, etc. You'll be lucky to have enough left over to pay for a week long ski trip for the family, which is fine for me.
olie25
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Post by olie25 »

this is something im working through as well, all you really need for basic liability protection is

1. resister incorporated
2. product liability insurance for 1-5 mil

after that there are lots of additional things you can do to insure the business for injury during mfg ect.

never mount a pair of bindings, if you have demos you want set up make a deal with a local shop to do it for you there techs right yearly tests to be certified and legally protected. that would probably be the easiest place to get screwed.

also get a lawyer to do up a disclaimer for the product. i pretty much took a bunch from random companies to my university law faculty had a grad student draft it and my buddies dad did all the legal "stamp of approval" kind of stuff didnt really cost me anything.
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MontuckyMadman
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Post by MontuckyMadman »

If you dont mount and set up either a llc or s corp and a have a serious waiver form signed in triplicate you dont need general liability.
Thats what we are going with.
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barnboy
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Post by barnboy »

I get a good laugh out of politicians talking about "small business" growth, as we've all discovered, you pretty much have to already be successful to start your own business, especially if you think you actually want to employ someone... but that's another thread.

Des nailed it, if they want to sue you, they'll sue you. LLC/S-corp give you a bit of protection as far as your assets vs. any company assets, but the right amount of $ and lawyers can break right through that as well.

I've been told by folks who have gone through all of this to embrace your "worthlessness". You're never going to enjoy your little business, or as free to experiment more than when you're not worth anything.
barnboy
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gathering of the tribes

Post by barnboy »

I've been thinking a lot lately about trying to put together a gathering of folks. I'm sure this needs it's own thread, but thought this would be a good place to test for interest.

Anyhow, I know winter is a sacred time for most of us. I was thinking spring-season. I could probably host an east-coast gathering, I work at a little inn in VT that could hold 30 - 40 folks no prob. Might be cool to get together, show off some stuff, and talk about your process, legal issues, whatever...

Thought it might be something cool, maybe it's already happening and I'm unaware?
petemorgan(pmoskico)
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Post by petemorgan(pmoskico) »

@barnboy, I am in full support of a ski building summit/show off some skis and drink beer. I live in washington state however though, so traveling to the east coast is unlikely.
And this is actually fit for another thread. I would vote for Crystal mountain as the location in late March or early April. I know there are a lot of ski builders in washington. late season seems like a good time because we would be guaranteed snow in one form or another, and the days are longer so hanging outside later would be sweet. i am open for ideas, i know alot of us are back country enthusiasts and might even repel ski areas, but ski areas seem like a pretty reliable place to have a summit.

anyways back on topic, yes liability should not be taken lightly, i do not touch anyone's bindings. (although i prefer to mount my own)

good discussion about LLCs and S corperations and coming up with a waiver.

@ montucky: would it be possible to get that waiver emailed to me?

i am a little concerned that my renters insurance wouldn't cover my tools if it was deemed that they are used as a business. i think it would probably still be considered a hobby/experiment and not a business.
barnboy
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Post by barnboy »

for any interested parties, I've started an east coast summit thread in the Après section.

Something else to consider, most of the hotels/condos in Summit County, CO are all looking for guests in April, and are usually willing to make some great deals. Would be a nice "central" location, could hang out at the beach @ A-bay... maybe too much to pull of this year, but something to think about down the line...
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