Self Employed and getting sued

[SS9]

Hi Folks. SWMBO is self employed and works in the creative/fashion industry. We were talking earlier today about the risk that she sells a design to a client and gets accused of copyright infringement and subsequently gets sued. I have a couple of questions on this...

a) Is this even a possibility? Can a self employed person get sued and is the potential amount unlimited?

b) If so, does this put our personal finances at risk? If so so, what's the best means of protecting against this (other than the obvious not getting sued in the first place).

Appreciate any advice!

[Djtemeka]

Go Ltd. Self employed is risky. Your house could go

[stinkyspanner]

Yep LTD company, if it goes tits up you might lose your business but you won't lose your house

[deckster]

Djtemeka said:

Go Ltd. Self employed is risky. Your house could go

Fundamentally this. Separation of the company from the person is pretty much the reason that limited companies exist.

Self-employed, they sue you personally, you could lose everything. As an employee (and/or director) of a limited company, they sue the company and your losses are limited (geddit) to the assets of the company. Only in rare and specific circumstances can the directors of a company be sued personally.

[Mr_Webb]

Does your wife have professional indemnity (PI) insurance? If not, it would be worth getting cover in place and then look at whether Ltd makes sense (in addition).

[SS9]

Appreciate the responses, thanks all. We've been thinking about the LTD company for a while now, this is probably the trigger to get it going!

This is possibly quite a specific scenario, but would forming a LTD company offer 'backwards' protection? E.g. if she was sued for something she did last year, would she be sued as self employed or LTD company? Cheers.

[Mr_Webb]

I can't see how they could sue the Ltd as no contract exists i.e. the claim would be againstyour wife. You may be able to obtain retroactive PI cover.

[SS9]

Mr_Webb said:

I can't see how they could sue the Ltd as no contract exists i.e. the claim would be againstyour wife. You may be able to obtain retroactive PI cover.

Thank you, will look into PI.

[Jasandjules]

As above set up a LTD company and do all work through this. Then get PI insurance as well. And an accountant. The costs add up but the protection is worth it.

And no if someone sues her for work previously undertaken then it is her being sued. Only matters run through the LTD company will be protected as such. I do not know if anyone would ever offer retrospective indemnity but I guess worth looking into (my gut says no-one would but there we go).

[StevieBee]

I operate in the creative arena.

First thing to note is that proving copyright infringement in this field is exceptionally difficult unless the copy is blatant. In creativity there is no such thing as an original idea as each idea is stimulated by what has gone before. That doesn't stop some companies from trying and you then have to spend fortunes defending the case.

So yes, Ltd company is a must.

SS9 said:

would forming a LTD company offer 'backwards' protection? E.g. if she was sued for something she did last year, would she be sued as self employed or LTD company? Cheers.

Possibly.

She would need to legally assign ownership of all designs to the limited company.

[Doofus]

StevieBee said:

Possibly.

She would need to legally assign ownership of all designs to the limited company.

But if somebody else later claims the design is actually theirs, then she would not have been able to assign ownership to her company, and would still be open to action against her personally.

[StevieBee]

Doofus said:

StevieBee said:

Possibly.

She would need to legally assign ownership of all designs to the limited company.

But if somebody else later claims the design is actually theirs, then she would not have been able to assign ownership to her company, and would still be open to action against her personally.

Yeah. Hence 'possibly'.

Certainly if there is a case in hand, the design couldn't be transferred into the Ltd co but if not, then the company can be made the legal owner. If a claim is subsequently made and upheld, it would then come down to a court to determine if the designer is liable or the company that owned the design.

[Mr Pointy]

StevieBee said:

Doofus said:

StevieBee said:

Possibly.

She would need to legally assign ownership of all designs to the limited company.

But if somebody else later claims the design is actually theirs, then she would not have been able to assign ownership to her company, and would still be open to action against her personally.

Yeah. Hence 'possibly'.

Certainly if there is a case in hand, the design couldn't be transferred into the Ltd co but if not, then the company can be made the legal owner. If a claim is subsequently made and upheld, it would then come down to a court to determine if the designer is liable or the company that owned the design.

If she is operating through a Ltd Co then she's an employee & any contractual arrangement is betwen the client & the Ltd Co, not her. Obviuosly this doesn't apply to any work performed before the creation of the Ltd Co.

[Doofus]

Mr Pointy said:

StevieBee said:

Doofus said:

StevieBee said:

Possibly.

She would need to legally assign ownership of all designs to the limited company.

But if somebody else later claims the design is actually theirs, then she would not have been able to assign ownership to her company, and would still be open to action against her personally.

Yeah. Hence 'possibly'.

Certainly if there is a case in hand, the design couldn't be transferred into the Ltd co but if not, then the company can be made the legal owner. If a claim is subsequently made and upheld, it would then come down to a court to determine if the designer is liable or the company that owned the design.

If she is operating through a Ltd Co then she's an employee & any contractual arrangement is betwen the client & the Ltd Co, not her. Obviuosly this doesn't apply to any work performed before the creation of the Ltd Co.

The point was whether she could transfer ownership od a design to the company even if it transpires that design was subject to copyright, and that she, consequently, didn't own it in the first place.

[NMNeil]

I believe that if there is an unintended copyright or trademark infringement the first thing she will get is a cease and desist letter from the copyright or trademark holder, then it goes to arbitration before legal action is taken.
https://www.gov.uk/topic/intellectual-property/cop...

[this is my username]

If you are really concerned then transfer all of her assets in to your name - then if she gets sued there is nothing to take.

I am a pauper, but my wife owns a very nice house and a load of investments.

[Panamax]

this is my username said:

I am a pauper, but my wife owns a very nice house and a load of investments.

Massive, massive, massive risk!

"I am a pauper, but my ex-wife owns a very nice house and a load of investments."

[this is my username]

Panamax said:

Massive, massive, massive risk!

"I am a pauper, but my ex-wife owns a very nice house and a load of investments."

Really? I feel sorry for you.

[Ronstein]

I 'd suggest that PI insurance is a must if you're self-employed.

I have £100k cover for Breach of Professional Duty and Claim costs, Breach of Confidentiality and Legal Expenses. £132.38 per annum.

[bad company]

went from sole trader to a Limited Liability Partnership ‘LLP’ on the advice of my accountant. That gave me protection but I could remain self employed as a partner/member of the LLP.

Not sure if that still applies today but it worked for me.