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JerrySJD
JerrySJD, Attorney
Category: Business Law
Satisfied Customers: 821
Experience:  Attorney for business formation, business sales, tax, partnerships, sole proprietors and buy/sell agreements.
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Question with regard to liability of an existing company A

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Question with regard to liability of an existing company A that provides yoga workouts in their own studio several times a week. Customers come at specific times and the instructors lead the class and own the business.

Company A now plans to provide those instructed workout routines, in a private setting, to Company B, in a video format, so Company B can make the videos publicly available on a website. Company B is owned and led by different individuals and is in the eCommerce business. Company A does not want to be liable for law suits that originate from online viewers. Company B will not indemnify Company A.

IN order to mitigate liability for Company A ,could Company A create another Company C, which is only in the business to provide video material to Company B?

In other words, Company A and C are led by the same people and both provide the same yoga workouts, yet, Company A would be in the business of instructing classes in its studio; Company C would be a separate entity and would be in the business of providing workout video material. Would that work to protect Company A's assets?

JerrySJD :

Yes, very smart move. You can isolate liability and accounting for the video activity in Company C. This will also give you other advantages in the long run. For example, you might decide to sell one company or business line and keep the other. Nice to keep the accounting separate. Just be sure that, if you go this route, you clealy delineat Company C on the contract, letterhead, bills etc. You do not want the "alter ego" doctrine to be an issue. As long as it is clear that Company B is dealing with Company C, you will be covered.

JerrySJD :

Good luck. Yoga rocks and I hope you do really well.

JerrySJD :

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