Should I Create a Business Entity Just to Protect Myself from Liability?
June 17, 2013 10:13 AM   Subscribe

I have a good idea for a web application, but I'm worried it might incur the wrath of a few specific larger companies. Would it be a good idea to create a business entity to protect myself from any personal liability I might be exposed to?

As a personal project I'm interested in building a web application that I think would be pretty cool. Because I'm still in the early stages and I think its a great idea I really don't want to describe it in detail. The most I will say is that it involves a lot of linking to content on a few specific websites.

I'm worried some of these websites might get upset about my application and take legal action. I also think that this fear might be a bit extreme. My application would not be distributing or even copying copyrighted content - just linking to it (and not stuff like mp3s, videos, or porn). At the most, enough to "annoy" these larger institutions, and nothing illegal that I can think of.

My understanding is that if I created this application under the umbrella of some business entity (LLC?) it would incur all liability that could otherwise be applied to me. My question is this: Is it "sensible" to spend the time to register an LLC or other business entity just to protect myself from liability? Location is Virginia.

In case it is not obvious, I'm a tech person with very little knowledge of business/legal matters. I'm planning on posting the finished application on MeFi Projects when I'm finished (and maybe the best plan is to have people evaluate it there).

AA
posted by AfterAlbuquerque to Computers & Internet (13 answers total) 1 user marked this as a favorite
 
Get a lawyer. Bring your concerns to a lawyer who specializes in small business law.
posted by gauche at 10:34 AM on June 17, 2013 [3 favorites]


Take a look at the Terms of Service of the content providers. It's possible that they already don't allow this.

If they do allow it, and if you're being a bad player (with due respect, it sounds like you're being a bad player either by direct-linking or scraping their content) and they could and should ban you by IP or some other app signature. Is your app going to honor the robots.txt filter for search engines?

I don't think anyone would be harmed by you doing this for yourself, but making it a commercial (even if free) product could incur some Cease & Desist letters quickly, and probably more trouble if you don't. IANAL.
posted by Sunburnt at 10:54 AM on June 17, 2013


The first question you need to answer is this: is what you are proposing to do in compliance with all applicable laws? The law is full of surprises. You say that your idea would involve "nothing illegal that I can think of." Huh. A lawyer knowledgeable in the field will probably think of areas of potential liability you would never begin to imagine. Or, they might say "no problem" and conclude that you have no reason to be concerned at all. Either way, you need to know before you jump in. If there are genuine concerns, a lawyer (and only a lawyer) will be able to advise you about how to best protect yourself from potential liability. Just doing business as a corporation won't necessarily give you automatic or comprehensive protection.

You absolutely need to discuss the legal issues with a competent lawyer.
posted by Corvid at 11:00 AM on June 17, 2013


nothing illegal that I can think of . . . I'm a tech person with very little knowledge of business/legal matters.

Is there a single reason you shouldn't hire a lawyer here? I can't think of one.

LLC's are nice, but if they were magic, everyone would have one just for themselves and we'd all be liability-proof. It doesn't work quite like that.
posted by toomuchpete at 11:57 AM on June 17, 2013 [2 favorites]


The reason you should hire a lawyer is because you have no idea what the answer to this question is.
posted by odinsdream at 1:04 PM on June 17, 2013


Ok, so I asked a question like this, except it was about making a movie. Initially I pushed back on the hundreds of "U NEED A LAWYER U R DUM LOL" answers.

But eventually I had to admit that, in spite of the tone, they were correct: I needed a lawyer. In my case, I didn't even know what I should name the company- the lawyer I got ended up recommending I form a company just for this one film, not all films I will ever do. There are a million things like that.

I got a recommendation through an org called California Lawyers for the Arts. Maybe someone can recommend something similar for tech?
posted by drjimmy11 at 1:27 PM on June 17, 2013


Sounds like you're talking about deep linking, which carries with it a whole bunch of issues.

I would suggest you voice your concerns with a lawyer (I'm not one). I would also note that in my experience it's really hard to find someone who can actually answer specific questions about technology like this. So don't waste money until you find someone who understands your business and the law surrounding it.
posted by RobotVoodooPower at 1:47 PM on June 17, 2013 [1 favorite]


I don't think you need a lawyer just yet. I think you need an elder trusted techie or two to whom you can describe your idea, then, like RobotVoodooPower can point you to previous legal cases. Once you know the issues involved, you can better screen lawyers.
posted by Sophont at 7:27 PM on June 17, 2013


I think you need an elder trusted techie or two to whom you can describe your idea, then, like RobotVoodooPower can point you to previous legal cases. Once you know the issues involved, you can better screen lawyers.

This is the functional equivalent of talking to your brother-in-law who was pre-med before he dropped out of college rather than just going to the doctor.

Yeah, it's cheaper. Yeah, he might have some okay advice.

Those are both great things . . . unless he misses something. Or gives you bad advice. The issue isn't that these situations can't be navigated without a lawyer, it's that attempting to do so subjects you to risks that you cannot properly evaluate (or, in some cases, evaluate at all).

The questions posed are not technical questions. They are legal questions (for example, as they relate to corporate forms) and they should be directed to legal professionals. Folks who have good experience in technology, yes, but lawyers all the same.
posted by toomuchpete at 7:46 PM on June 17, 2013


>My understanding is that if I created this application under the umbrella of some business entity (LLC?) it would incur all liability that could otherwise be applied to me.

When you consult with a lawyer, he will advise you that this understanding is wrong.
posted by megatherium at 8:18 PM on June 17, 2013 [1 favorite]


Sounds like you're talking about deep linking, which carries with it a whole bunch of issues.

So yes, "Deep Linking" is most of what I will be doing, but only to freely available content, and not passing it off as my own (although I know this does not help answer the question). This article suggests that the practice is not necessarily indefensible.

It is clear to me that I need to consult with a lawyer. My problem: as of now, this is just a personal project and I don't have much time or money to sink into legal consultation.
With the understanding that this is not the next napster or bittorrent, is it "safe" to proceed while this remains a non-commercial enterprise? This is definitely another area where I need real legal advice, but I'm interested in opinions.
posted by AfterAlbuquerque at 6:06 AM on June 19, 2013


Since you're asking for opinions, no, of course this is not safe.
posted by odinsdream at 6:14 AM on June 19, 2013


I am a lawyer, but I am not your lawyer and this is not legal advice. You should, as I've stated above, consult with a competent attorney in your state or jurisdiction.

Every endeavor carries with it some degree of risk. It is impossible, on the basis of your descriptions here, to give you an assessment of that risk in a way that will be helpful to you.

Therefore, the answer has got to be no, this is not safe. There are potentially-very-large unknown risks out there waiting for you.

I don't think you should give us more details. I think you should look at your own stomach for unknown, potentially-very-large risks, and decide whether you want to live with this one for a while until you decide whether it's worth hiring a lawyer to advise you.

Another risk-mitigating thing you can do is to purchase business liability insurance, whether you go the LLC route or not. In order to do that you'll have to talk to an insurance agent whose job it is to price out the kinds of risks you're insuring against and to sell you coverage for just a little more than the price of the risk. Whether or not you and that agent, together, can craft a policy which will protect you from all your potential risks is itself kind of a big unknown.
posted by gauche at 5:58 AM on June 20, 2013


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