Crowd Funding Business

I’m in the preliminary stages of putting together a business closely rooted in crowd funding. At this point I’m looking at options for managing funds. I would like to lay out my plan going forward and have people pick it apart so to speak from a legal and realistic perspective.

The first thing I plan to do is create a LLC for this new business. I believe it is relatively inexpensive to set-up a basic LLC for the protection provided if things don’t quit work out. Once that is done I than plan to open a separate bank account associated with the business. Now in regards to processing payments my thoughts on that are Paypal. From my research it seems pretty straight-forward and easy to create a business account once a tax ID is obtained from forming an LLC.

So I guess my major question for a business that will essentially amount to people purchasing credits and using those credits to buy something else for others does this all seem like the correct route to take from a business perspective? I would think that if I don’t set-up some type of LLC that the business would not be legal and I could be personally held liable for customer losses, correct? Where as, with an LLC the business can only be held liable, so people wouldn’t be able to come after personal assets, right? Not that I’m planning on failing or anything but it is always better to be safe than sorry.

Reading up on this some more I should probably mention that I will be the sole owner. It seems like there are some changes in tax rules and what not with a single owner.


There are limits to LLC protections, but if you do things by the book you should be okay. For example, if you use the LLC funds like personal funds, you could be more easily personally sued. Instead, write yourself paycheck. Be careful to keep separate accounts.


I would think that if I don’t set-up some type of LLC that the business would not be legal and I could be personally held liable for customer losses, correct?

No and Yes. It’s perfectly legal to operate a business as a private individual. But, yes, the whole purpose of a LLC is to limit your liability (but for your losses, not customer losses).

That said, if you plan to borrow a substantial amount of money, the lender might well ask you to put up some personal property as a security, or to give a personal guarantee that the company will repay it. That means, if the company fails, the lender would be able to go after you personally. Of course, it’s up to you whether you agree to accept a loan on that basis.

LLCs apart, you’ve got a bigger hurdle to jump. You say people are going to be “purchasing credits” and “using those credits” to buy things. I’m not completely clear how that’s going to work. But if it involves you holding money on behalf of clients, then you will probably be subject to stringent regulatory controls. I don’t know the law in your country or state, but it’s likely to be quite strict. For that reason, you should take proper legal advice if you plan ot hold money on other people’s behalf.



This is something I have already considered and researched. Probably need to seek some legal advice but I’m 90% convinced what will be sold is legal.

I anticipate the start-up cost will be relatively low. Therefore, I don’t believe a loan will come into play.


I wasn’t suggesting it was not legal. I was just saying that there are probably regulatory conditions that you’ve got to be aware of.