Dickson, TN asked in Business Formation and Business Law for Tennessee

Q: Im going to start an ecommerce website. I do I need an LLC out the gate to protect myself?

Im wanting to start an ecommerce website. Do I need a LLC to protect myself just to test the business and the market. However, I do have an ok savings but I do not want to get sued. I'm scared that I would lose my personal savings if I don't.

What I mean by testing the business and market = I might not continue with the business model if its not making money.

2 Lawyer Answers
Mr. James Charles Wright
Mr. James Charles Wright
  • Knoxville, TN
  • Licensed in Tennessee

A: I'm not sure what you mean by "testing the business and the market." if you are going to have a business you should consider forming an LLC or a corporation to try to insulate from liability.

Michael Ray Smith agrees with this answer

Michael Ray Smith
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A: I'm not a Tennessee attorney, but the answer to your question would be more or less the same in any state.

I agree with Mr. Wright. Yes, you should have an LLC out of the gate. A corporation is another alternative, but an LLC is generally the structure of choice for small businesses. To stretch the metaphor almost to its breaking point, you should set up the LLC even before you get in the gate. For example, you should set up an LLC before you register domains and then register them in the LLC's name instead of yours.

I also encourage you to hire an attorney in Tennessee to help you set it up rather than trying to set it up yourself, even if you will be the only owner. Although LLCs are relatively easy to organize as compared to corporations, and DIY LLCs are common, there are potential pitfalls (which are specific to the particular state statute) that an attorney can help you side-step. There may also be beneficial aspects of the state's LLC statute that you can take advantage of that you might overlook if you do it yourself. I also recommend you also find an accountant and an insurance broker, again right out of the gate. There are some basic decisions to make when you set up the LLC, and it's best to make them with the advice of both an attorney and an accountant. Insurance, especially liability insurance, is also important, even with the liability shield afforded by the LLC or corporation.

Good luck with your new business venture!

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