Monday, July 27, 2015

Will an LLC Shield Me From Copyright and Trademark Lawsuit?

Dear Rich: I'm attempting to get licensing from several professional and collegiate sports associations, I've received licensing for some but not all and plan to sell, or would like to sell, product before all are in place. The copyright issue falls somewhat in the gray area but nonetheless I feel it's prudent to have personal liability in place. My question is will an LLC give personal legal liability protection from a lawsuit brought by one of these copyright or trademark holders? Or do I need to structure it as a C or S corporation, and if so which is better with regard to this concern?
Forming an LLC or corporation (whether S or C) can limit your personal liability but it won't shield you from negligence or intentional wrongdoing. If a court determines that you intentionally infringed, it can reach through the corporation or LLC and make you personally liable. Alternatively, a lawyer suing your business may try to “pierce the corporate veil” because you set up the LLC or corporation for  fraudulent purposes. Perhaps you can get an attorney's opinion regarding your licensing activities before you start selling your products. In either case, it's probably not best to rely on that "invisible shield."