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If I form a LLC today, would I be protected from any lawsuits from the past inventory I sold BEFORE I became a LLC, or am I only protected from the date of my LLC going forward?

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    I'm voting to close this question as off-topic because this is a legal question, not a freelance question. Try Law.stackexchange.com – Scott Mar 20 '17 at 22:51
  • I think it's appropriate given that it should be common knowledge for most business owners. – Kris Mar 21 '17 at 21:48
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Any transactions before the formation of the LLC would technically be under a sole proprietor/individual. For example, at your personal bank account, not a business LLC bank account.

Yet, even with an LLC, your personal assets could be seized for breaching the cooperate veil if the LLC is not held in good standing, mixing business and personal transactions so as to blur the two identities, or other bad business practices happen.

Bottom line: LLCs offers some protection from personal liabilities as long as the LLC is in good standing, but unfortunately it would only apply to the business transactions that occurred through the LLC, not through a personal checking account.

  • Unless, by forming the LLC, you "purchase" the business (brand name, assets, etc) from yourself... Not sure how legal that is in your country, but is absolutley fine in some. – JohnHC Mar 22 '17 at 10:54
  • Sounds like you're referring to registering the DBA individual / proprietor under the new LLC (with a new EIN number) which is totally fine but doesn't really factor into the liability question – Kris Mar 22 '17 at 12:33
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As a freelancer, you hold several distinct roles within the company

  • Owner/shareholder
  • Director/Manager
  • Employee/Worker

The Limited Liability bit only limits the liability of the stock/shareholders - to the amount of their investment.

Activities by the director/manager are subject to their fiduciary duties - which is why most companies hold Director's Indemnity Insurance; likewise, activities by employees are subject to them meeting the law - and why most companies hold Public Liability Insurance.

If a product is defective, or an employee of the company breaks the law, the company is still liable...

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You need a professional indemnity that covers claims arising out of that period. PI is kind of an "passive legal protection" because the insurance company will try to protect you to not have to pay any claims.

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