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Thread: Hosting Company liability

  1. #1
    Join Date
    Aug 2004
    Location
    Kansas City, MO.
    Posts
    209

    Hosting Company liability

    I'm in the process of starting a new web hosting and development company by purchasing a 'reseller' account.
    I'd like to get opinions on whither to register as a sole proprietor or an LLC.
    Do the standard 'terms' and 'acceptable use' forms give you enough coverage to protect your personal assets?
    If not, what are the additional costs of going LLC?
    Thanks in advance

  2. #2
    Join Date
    Jul 2003
    Location
    Lansdale, PA
    Posts
    88
    Hi,

    I don't know too much about the hosting business, except that when I got my professional liability insurance, hosting was specifically listed as an "excluded" activity. Meaning that any suits arising from hosting activities were not covered - I assume this means liability for web hosts is greater than for consulting activities.

    In any case, I think you should speak with an attorney or business consultant - spending a few hundred $$ on consulting time up front could save your assets (pun intended) down the road.

    I would think you'd be steered to forming an S-corp - that form of business protects your personal assets better than the others.

    But, as I said, you're best bet is to speak with an attorney.

    -Jim

  3. #3
    Join Date
    Nov 2004
    Posts
    10
    Your liability would depend upon the strength of your terms of service with your customer and its enforceability. Anyone can sue anyone for anything, but if a company is depending on a shared server hosting account I doubt they are in a financial position to sue if something happens to their site. I host about 10,000 small websites and have never had any hint of being sued by a customer. That's not to say it can't happen, but it is generally the least of my concerns.

  4. #4
    Join Date
    Aug 2004
    Location
    Kansas City, MO.
    Posts
    209
    So are you only registered as a sole-proprietor or did you opt for an LLC or S-corp?

  5. #5
    Join Date
    Nov 2004
    Posts
    10
    I'm a sole proprietor. But the hosting is just one part of my business, computer retail and service. It wasn't planned that it would amount to much but it has. So part of my daily ponderance go towards what to do about that. The costs of incorporating vary from state to state so giving advice here wouldn't be worth much. You would have to get with someone who specializes in that in your area.

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