Legal Question in Business Law in California

Re: LLC Protection and Food Delivery Insurance

If handled appropriately you could spin off the delivery service from your primary business. If that delivery service was funded and ran appropriately (adequate insurance can be a method of funding), you should be able to shield your primary business from liability associated with the delivery operation. That being said, the fact that the delivery business's only client looks a little fishy. Is that enough to cause liability to be attached to the company? Probably not, as long as the company is funded, insured, and ran as a completely separate entity. You are going to want to see an attorney to make sure you do this correctly.

I would recommend getting both vehicle insurance and general business liability insurance. Also, there has been some recent tax court litigation with regards to delivery drivers (as to whether they are employees or contractors), so make sure you are up to snuff on all of these issues.

Re: LLC Protection and Food Delivery Insurance

It is possible to set up a separate corporation for delivery that is intended to protect the pizzeria from 'direct' liability. You would need a solid contract between the two companies/corporations that attempts to isolate one from the other. However, that won't stop someone from suing both when an 'unpleasantness' occurs and they want to go after everybody in sight. It will be clear to all parties when that happens that there is a strong relationship between the two; order taking, delivery instructions, advertising, names, etc. Thus, serious risk of judgment against both.

You would be quite foolish to rely upon car insurance, as it generally doesn't cover business use, without a specific provision to do so. You would also be foolish not to have general business liability insurance, tailored specifically for the business and risks you face, that provides good legal defense costs, with a minimum of several million dollars in policy limits, and an umbrella policy above that. If some kid in your vehicle runs over a pregnant mother in a crosswalk, you're going to learn the hard way what can happen in a trial; you'll want good insurance to prevent your business and personal bankruptcy.

Feel free to contact me if you get serious about obtaining the legal advice and counseling you need to do these things right, with less risk to you and your assets.

Re: LLC Protection and Food Delivery Insurance

California courts have a pretty strong track record on recognizing the separation between a corporation and its owners (alter ego/corporate veil piercing) and in parent-subsidiary and common-control (sister company) cases. The veil and the separateness is usually recognized except where the management itself has chosen to disregard them. Also, the same general principles are applied when we're speaking of an LLC instead of a corporation.

Nevertheless, using a separate entity is a less than perfect form of armor, and I would not advise any client of mine to use a separate but related entity instead of insurance for the sole purpose of insulation against liability. Vehicle liability is not enough; you'll need broad business-laibility insurance andprobably should be sure the deliverers have workers' comp. coverage.