Hello! I am located in Texas. I want to start a small home-based craft business (selling art prints and wood mounted prints and possibly in the future wearable items featuring the art.) I plan to start out on etsy.com and local craft/art fairs. I will be the only one running the business so I prefer to stay a sole proprietor for ease of taxes. There will be no customers at my house. So my main concern is liability if someone is injured from my product. While I don't think I have a high risk product, some of my art may be hanging in a child's room. My fear is if it falls off the wall and injures a child or some other accident happens, I could be at risk. I know I will need insurance to attend a fair. But just with online sales, is it necessary to form an LLC to protect my personal assets or will liability insurance protect just as well. Which is the better option, or are both necessary. Thank you!
1 Answer from Attorneys
Generally you are strictly liable for the products you produce. In the scenario you have described, you would be liable where your product is defective, such as a mounting hook or brace, and that causes the product to fall off the wall and injure somebody. You may also be liable for foreseeable misuse of the product, such as foreseeable improper mounting. You are not liable for all injuries that could arise from the use of your product. You could hire a lawyer to help you write a product warning to limit your liability.
Forming a limited liability business organization would provide another layer of liability, not just for product liability but also liability on contracts. You can form a corporation or LLC with minimal additional difficulty preparing your taxes.
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