LLC and Camp insurance???

Don't pay for somebody to create an LLC for you. It is ridiculously easy through your state corporation commission (or similarly named body) to do it yourself. Takes about 5 minutes.

You will want to set up a separate bank account for your LLC (and will need a taxpayer ID number from the IRS). If you mingle your funds you destroy the whole purpose for the LLC. That is also a very easy process.

Can't help you on the insurance.

Yes, definitely need insurance to cover general liability, other needs, including facility or vehicle (if you rent vans, etc.) coverage. Even worker's comp may have to be addressed for your counselors. You can form an LLC via Legal Zoom, or hire someone to do it. There are plenty of sports camp insurance providers, just google and find one in your area.

it is a little unclear to me why you feel like an LLC would be beneficial here.

what are you hoping to obtain by using an LLC + insurance that you would not be able to have with insurance alone?

And yes, as above poster mentioned, forming an LLC is as easy as 1-2-3 through your state's secretary of state, department of corporations website. You can find templates for articles of organization, operating agreement (lays out who can execute docs for the LLC, ensures that courts will respect your limited personal liability vs. sole proprietorship), appoint a registered agent to accept legal papers, etc. Yes, you will need an EIN via the IRS, and register with your state's Dept of Revenue. Come to think of it, you more than likely will be be required to show proof of worker's comp insurance and abide by state's payroll laws if hiring counselors.

kaitainen wrote:

it is a little unclear to me why you feel like an LLC would be beneficial here.

what are you hoping to obtain by using an LLC + insurance that you would not be able to have with insurance alone?

I am not the O.P. so I am just guessing but the main purpose of using an LLC is to limit liability.

Mr. Obvious wrote:

kaitainen wrote:

it is a little unclear to me why you feel like an LLC would be beneficial here.

what are you hoping to obtain by using an LLC + insurance that you would not be able to have with insurance alone?

I am not the O.P. so I am just guessing but the main purpose of using an LLC is to limit liability.

Naturally. But in this case, with a wholly owned llc and insurance, is there really any liability limited with an llc that is not limited with insurance alone? If the op is far wealthier than I imagine he is, perhaps the value of even minimal limited liability protection is high.

The activities and income here seem so limited. It isn't clear to me that the relatively minimal cost of setting up an llc makes any sense here, especially if insurance will be purchased.

Yeah, don't pay a lawyer to file the LLC for you.

Unless you have questions about it.

PS - That goes for everything.

kaitainen wrote:

Mr. Obvious wrote:

I am not the O.P. so I am just guessing but the main purpose of using an LLC is to limit liability.

Naturally. But in this case, with a wholly owned llc and insurance, is there really any liability limited with an llc that is not limited with insurance alone? If the op is far wealthier than I imagine he is, perhaps the value of even minimal limited liability protection is high.

The activities and income here seem so limited. It isn't clear to me that the relatively minimal cost of setting up an llc makes any sense here, especially if insurance will be purchased.

If you have equity in a home I think that is worth protecting, personally, but maybe I am overly conservative.

An LLC cost ~$100 in my state. Pretty cheap.

Plus setting it up as a separate business helps with the accounting.

If he is hiring staff it may well be worth it to pay a lawyer or accountant for advice on taxes, regulatory requirements, etc. Not worth it to pay for filing the LLC though.

Mr. Obvious wrote:

If you have equity in a home I think that is worth protecting, personally, but maybe I am overly conservative.

LLCs often turn into de facto proprietorships anyway because lenders require personal guarantees.

guarantee wrote:

Mr. Obvious wrote:

If you have equity in a home I think that is worth protecting, personally, but maybe I am overly conservative.

LLCs often turn into de facto proprietorships anyway because lenders require personal guarantees.

In this case the liability may be from lawsuits and not from lenders. I know this is true in my personal case with my LLC. I did have to sign a personal guarantee to get a business credit card, but as my business cash flow was positive from Day 1 and I only use the credit card for convenience (paying for material over the internet, for example. I am in a high risk business (skydiving) and without insurance (which does not exist for this industry).

I'm with kaitainen on this. Running an LLC isn't as inexpensive as many of you make it sound (at least not in CA). The minimum annual fee is $800 here (and goes up from there depending on revenue). Sure you can do it yourself, but it still takes time. And it will complicate your tax situation too.

I'd consider whether it's worth it. Are you doing this to make money or some other reason (recruiting)?

sunflower wrote:

I'm with kaitainen on this. Running an LLC isn't as inexpensive as many of you make it sound (at least not in CA). The minimum annual fee is $800 here (and goes up from there depending on revenue). Sure you can do it yourself, but it still takes time. And it will complicate your tax situation too.

I'd consider whether it's worth it. Are you doing this to make money or some other reason (recruiting)?

~800 is a lot more money than it is in my state.

It does not take any more time to run it than it would to run a sole proprietorship.

how does it complicate taxes? An LLC is all pass-through income which gets recorded on a schedule C profit and loss statement. Pretty simple, and again not different from what you would get with a sole proprietorship, except you get to fully deduct a lot of things, instead of them being limited.

LLCs are pass through, but they still need to complete and file a tax return. Does a sole proprietorship need that or is it just on a schedule for your personal return? I don't know (my only experience is with LLCs and corporations).

Most of my hesitation is related to whether to do this at all (LLC or other form of business). If it were me I'd be doing it to make money and I'm not sure there's much money to be made for "a couple camps with 20-30 kids." I'd give that some serious thought first (I could be totally wrong, that's just my uninformed impression). If it's just a one-day session, just make the kids sign a waiver and collect some nominal (or no) fee.

Mr. Obvious wrote:

In this case the liability may be from lawsuits and not from lenders. I know this is true in my personal case with my LLC. ... I am in a high risk business (skydiving) and without insurance (which does not exist for this industry).

first of all, that's a cool business to be in.

second of all, the insurance thing is important. i posed the question of llc+insurance vs. insurance (and a sole proprietorship).

an extremely thinly capitalized, wholly owned llc, as this one would be, will probably not provide a very secure liability shield in most states.

usually i'd nevertheless just say go ahead and set up the llc, because there's little harm. the reason i am questioning it at all here is because the OP seems to contemplate a couple hundred dollars of profit total, at most. in that situation, spending a couple hundred dollars to set up the llc, and another hundred or two annually, seems like an unnecessary cost.

There's no way I wouldn't set up an LLC or corporation. No way would I want to risk the personal liability involved with running a camp. All it takes is one dumb @ss and you could lose everything.

SeeThaDifference wrote:

There's no way I wouldn't set up an LLC or corporation. No way would I want to risk the personal liability involved with running a camp. All it takes is one dumb @ss and you could lose everything.

i'm curious about this perspective on the legal system.

it appears that the conventional wisdom is that a wholly owned llc, with no meaningful capital and no substance of any kind other than the light camp operations, completely protects the owner of the llc from liability from lawsuits.

but simultaneously, that liability insurance would not do so.

am i properly stating the consensus conventional wisdom?

sunflower wrote:

LLCs are pass through, but they still need to complete and file a tax return. Does a sole proprietorship need that or is it just on a schedule for your personal return? I don't know (my only experience is with LLCs and corporations).

If your LLC is a single member LLC, then it is disregarded for federal tax purposes and all the income (or loss) is reported on the individuals personal return on a schedule C (or sometimes Schedule E or F, but usually C). There is no need to file a separate return.

There may or may not be a need to file additional papers with the state.

It is a little more complicated if it is a partnership but it still conceptually gets passed through onto individual returns and the LLC does not file its own tax return.

kaitainen wrote:

i'm curious about this perspective on the legal system.

it appears that the conventional wisdom is that a wholly owned llc, with no meaningful capital and no substance of any kind other than the light camp operations, completely protects the owner of the llc from liability from lawsuits.

but simultaneously, that liability insurance would not do so.

am i properly stating the consensus conventional wisdom?

Well, this is a complicated question and there are no guarantees as to what a court will or will not decide. In addition these are state court matters generally of case law, so the case law is different in every state. We are also potentially talking about two different kinds of liability--that for business debts and that from lawsuits.

An LLC provides some protection from personal liability. That corporate veil can be pierced in some circumstances. The most frequent conditions which courts consider in piercing the corporate veil are:

The most common factors that courts consider in determining whether to pierce the corporate veil are:

whether the corporation or LLC engaged in fraudulent behavior

whether the corporation or LLC failed to follow corporate formalities

whether the corporation or LLC was inadequately capitalized (if the corporation never had enough funds to operate, it was not really a separate entity that could stand on its own), and

whether one person or a small group of closely related people were in complete control of the corporation or LLC.

I am guessing but I think the inadequately capitalized would apply more to business debts than lawsuit liability in many instances.

Liability insurance in a non-LLC sole proprietorship will only protect you up to the limits of the insurance. It is probable that in many cases the suing party might not sue for more than the liability insurance limits, but legally you are entirely unprotected if you have, e.g. a $1 million policy and somebody is awarded a judgement against you for $2 million. This is exactly where an LLC would protect your house and other assets. Piercing the corporate veil would be difficult, I would think, in this instance as clearly the business has taken reasonable measures to provide for itself. (and if you have met the other conditions).

Certainly the strongest protections are going to come from both having liability insurance and an LLC. I haven't seen anybody tell the O.P. that insurance is not a good idea. It is a very good idea. The thing that scares me most about his business is the idea of hiring camp counselors. Better do your due diligence on criminal background checks. That is if he is going to hire counselors--which also gets into payroll taxes and other complications which may not financially be worth his time.

That's all just off the top of my head, though.

kaitainen wrote:

i'm curious about this perspective on the legal system.

it appears that the conventional wisdom is that a wholly owned llc, with no meaningful capital and no substance of any kind other than the light camp operations, completely protects the owner of the llc from liability from lawsuits.

but simultaneously, that liability insurance would not do so.

am i properly stating the consensus conventional wisdom?

Further, I'm not a lawyer, but I'm pretty sure that you can be sued personally anyway. LLC or not, the guy running the place can be found negligent. So your insurance covers run of the mill injuries that occur through no fault of the camp, and you're still personally liable for any injury that occurs as a result of a dangerous situation that you've created as the director of the camp.