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Hey all,

I was wondering, what (if any) things do you do before you start selling knives professionally?

Is it worth it to start an LLC or similar? Do you buy any type of business insurance? Do you have some legalese that you include with each sale?

Thanks,

Jim

Id start with www.sba.gov its a great resource for all those questions.

|quoted:

Id start with www.sba.gov its a great resource for all those questions.

Hey Matthew,

Thanks for the response and the link - but I am not asking the mechanics of how to do this, just if most knifemakers here consider it necessary to protect themselves with an LLC before selling knives.

I am hoping some of the moderators will respond.

Thanks,

Jim

I do all of my business transactions under the umbrella of an LLC. I currently have two different companies, one for residential contracting/building (also covers some property management) and another one (with my wife) for the artwork and knives. We do not carry any liability insurance on the artwork business as the laws state that the members of the LLC can only be personally held responsible for the dollar amount that was initially invested. So, for me it's not about the protection aspects of the LLC. It's about the financial benefits.

Major disclaimer here: you have to be diligent about keeping the money separate from your personal funds. The easiest way to "pierce the corporate veil" is to prove that the business and the person are financially one and the same. That means separate bank accounts, separate credit cards, separate financial everything, especially book keeping.

Business ownership comes with a whole lot of other stuff that you need to consider carefully. There are usually state registrations as well as federal ones, sales taxes to pay, additional income tax forms to fill out, etc. etc. etc.

In the end, I find it totally worth while to have the businesses and I would never not have at least one, even though I have a full time job.

|quoted:

I do all of my business transactions under the umbrella of an LLC. I currently have two different companies, one for residential contracting/building (also covers some property management) and another one (with my wife) for the artwork and knives. We do not carry any liability insurance on the artwork business as the laws state that the members of the LLC can only be personally held responsible for the dollar amount that was initially invested. So, for me it's not about the protection aspects of the LLC. It's about the financial benefits.

Major disclaimer here: you have to be diligent about keeping the money separate from your personal funds. The easiest way to "pierce the corporate veil" is to prove that the business and the person are financially one and the same. That means separate bank accounts, separate credit cards, separate financial everything, especially book keeping.

Business ownership comes with a whole lot of other stuff that you need to consider carefully. There are usually state registrations as well as federal ones, sales taxes to pay, additional income tax forms to fill out, etc. etc. etc.

In the end, I find it totally worth while to have the businesses and I would never not have at least one, even though I have a full time job.

Thanks so much Joshua - this is what I have been wondering about.

-Jim

I'd basically like to reiterate what Joshua said above. I'm a new smith(also new to the ABS/forum) and also registered as an llc, and created a separate business account to make sure everything remained kosher. Obviously your question had already been answered, but just wanted to agree that its the way to go, and what I had also done.

|quoted:

I'd basically like to reiterate what Joshua said above. I'm a new smith(also new to the ABS/forum) and also registered as an llc, and created a separate business account to make sure everything remained kosher. Obviously your question had already been answered, but just wanted to agree that its the way to go, and what I had also done.

Thanks for taking time to reply Collin.

-Jim

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Do you have some legalese that you include with each sale?

Thanks,

Jim

I did want to take the time and answer this particular question too. I do not provide any written verbiage about a knife being a dangerous item and you could poke your eye out or anything like that. I think we are covered legally under the "100 reasonable people" argument.

I do put a Care and Cleaning instruction sheet with every knife sale. It covers the basics about HC steel not being rust proof, never put the knife in the dishwasher (even the stainless ones get that), coating with a film of oil or other protective agent, and I include a packet of Birchwood Casey Barricade with every sale as a sample of what would be a good protective agent. In my early days, I sold a couple of O-1 elk skinners to a couple of hunters who took them up to Montana for a hunt. They got rained on pretty bad and were socked in for a few days. Both of their knives rusted a little and they were not happy. They had assumed O-1 was a stainless steel. OOPS! I took them both back and cleaned them up for free and gave them back. So now I include the info sheet.

|quoted:

I did want to take the time and answer this particular question too. I do not provide any written verbiage about a knife being a dangerous item and you could poke your eye out or anything like that. I think we are covered legally under the "100 reasonable people" argument.

I do put a Care and Cleaning instruction sheet with every knife sale. It covers the basics about HC steel not being rust proof, never put the knife in the dishwasher (even the stainless ones get that), coating with a film of oil or other protective agent, and I include a packet of Birchwood Casey Barricade with every sale as a sample of what would be a good protective agent. In my early days, I sold a couple of O-1 elk skinners to a couple of hunters who took them up to Montana for a hunt. They got rained on pretty bad and were socked in for a few days. Both of their knives rusted a little and they were not happy. They had assumed O-1 was a stainless steel. OOPS! I took them both back and cleaned them up for free and gave them back. So now I include the info sheet.

Thanks for the info Joshua.

to my knowledge, no knife maker has been sued for someone hurting themselves on a knife they purchased from said maker or its misuse on or towards others. If Im wrong, somebody please correct me so I have accurate info. Id stil lget a LLC just to be separate from my personal accounts if your planning to be full time and maker. Personally I dont make enough of them or sell many of them per year to justify it yet for myself. Most of mine I make for fun or as gifts to friends / trades for services or goods.

I was one of those whom an individual attempted to sue. I had a local guy show up at my shop one morning, asking if I sharpened knives. He brought a Buck 110 folder and asked me to sharpen it. I did so, and as he was leaving, I jokingly said "I'm not responsible if you cut any digits off with that knife!"

Later that day I got a phone call that I though was a prank from one of my knifemking friends. The individual on the phone asked if I was "Mr. Ed Caffrey", and then asked is I had sharpened a knife for XXXXXXX that morning, to which I replied "Yes". Very next words.... "I am XXXXXX Attorney, and you are being sued for medical bills/pain and suffering because Mr. XXXXXX cut himself with the knife you sharpened, and required 14 stitches in his hand."

Then he gave me his name and number, saying that I would be hearing from him the next day. By this time I got worried, and a little freaked out. Luckily, my Mrs. was playing city league volleyball at the time, with one of the prominent attorneys in town, and told him that evening what had happened. To his credit he called me, asked for some details and the other lawyers name/number, then said. I'll take care of it.

After being on pins and needles for most of the next day, he called back and told me that he had taken care of it for me. Seems the guy who had me sharpen his knife went home, started drinking that afternoon, (I assume he was drunk) and had slapped the edge of the knife on his palm while showing off to a friend. I learned later that what had saved my butt was the fact that I had verbally told the individual that I was not responsible if he cut off any digits.

Sounds crazy right? But yes, there are STUPID people out there, who do stupid things, and then want to blame others for their stupid actions. You can bet that ANY time I sharpen a knife for ANYONE, there is always a verbal warning given before the knives leave my shop. In addition, that same lawyer (free of charge) wrote up a Waiver of Liability for me, which is signed by anyone who comes for classes, or works in my shops. In his own words..... "Nothing will protect you 100% of the time, but a verbal warning is better then nothing, and a written Waiver is even better." I also change the verbiage on my invoices, both sales and sharpening to include.... "Knives are extremely sharp, not responsible of accidents or incidents."

In regards to insurance.... for the shops certainly, if you can find it for a cost you can afford. When it comes to liability insurance for a knifemaker, its difficult to find any insurance company/agent who will even consider it, and if you can, the premiums are generally just ridiculous. I've come to understand that there is a level of risk that each individual knifemaker must determine whether they can accept or not.

There are a number of various business models that a knifemaker can assume, each with it's own level of cost versus risk. My advice is consult a lawyer who is familiar with small or home based businesses, and get advice, based on your own needs, the risks your willing to take, and the associated costs of each. While everyone talks a lot about LLC type business models (because it's the most advertised), its not always the best avenue to go with in terms of just how much protection versus cost it provides. In my state, a "Home Based Business" model provides the right level of risk versus cost for me.... and is what I chose to go with. Keep in mind that the rules for a "Home Based Business" vary greatly from state to state, so check it out completely in your own area.... it's all about finding/deciding what's right for YOU.

As Ed says, the laws can vary greatly from State to State in the USA. The laws also vary from country to country and keep in mind that we have members in 25 countries around the world.

You need to consult your local attorney or legal representative for competent advice on these issues.

|quoted:

I was one of those whom an individual attempted to sue. I had a local guy show up at my shop one morning, asking if I sharpened knives. He brought a Buck 110 folder and asked me to sharpen it. I did so, and as he was leaving, I jokingly said "I'm not responsible if you cut any digits off with that knife!"

Later that day I got a phone call that I though was a prank from one of my knifemking friends. The individual on the phone asked if I was "Mr. Ed Caffrey", and then asked is I had sharpened a knife for XXXXXXX that morning, to which I replied "Yes". Very next words.... "I am XXXXXX Attorney, and you are being sued for medical bills/pain and suffering because Mr. XXXXXX cut himself with the knife you sharpened, and required 14 stitches in his hand."

Then he gave me his name and number, saying that I would be hearing from him the next day. By this time I got worried, and a little freaked out. Luckily, my Mrs. was playing city league volleyball at the time, with one of the prominent attorneys in town, and told him that evening what had happened. To his credit he called me, asked for some details and the other lawyers name/number, then said. I'll take care of it.

After being on pins and needles for most of the next day, he called back and told me that he had taken care of it for me. Seems the guy who had me sharpen his knife went home, started drinking that afternoon, (I assume he was druck) and had slapped the edge of the knife on his palm while showing off to a friend. I learned later that what had saved my butt was the fact that I had verbally told the individual that I was not responsible if he cut off any digits.

Sounds crazy right? But yes, there are STUPID people out there, who do stupid things, and then want to blame others for their stupid actions. You can bet that ANY time I sharpen a knife for ANYONE, there is always a verbal warning given before the knives leave my shop. In addition, that same lawyer (free of charge) wrote up a Waiver of Liability for me, which is signed by anyone who comes for classes, or works in my shops. In his own words..... "Nothing will protect you 100% of the time, but a verbal warning is better then nothing, and a written Waiver is even better." I also change the verbiage on my invoices, both sales and sharpening to include.... "Knives are extremely sharp, not responsible of accidents or incidents."

In regards to insurance.... for the shops certainly, if you can find it for a cost you can afford. When it comes to liability insurance for a knifemaker, its difficult to find any insurance company/agent who will even consider it, and if you can, the premiums are generally just ridiculous. I've come to understand that there is a level of risk that each individual knifemaker must determine whether they can accept or not.

There are a number of various business models that a knifemaker can assume, each with it's own level of cost versus risk. My advice is consult a lawyer who is familiar with small or home based businesses, and get advice, based on your own needs, the risks your willing to take, and the associated costs of each. While everyone talks a lot about LLC type business models (because it's the most advertised), its not always the best avenue to go with in terms of just how much protection versus cost it provides. In my state, a "Home Based Business" model provides the right level of risk versus cost for me.... and is what I chose to go with. Keep in mind that the rules for a "Home Based Business" vary greatly from state to state, so check it out completely in your own area.... it's all about finding/deciding what's right for YOU.

Thanks for taking the time to reply Ed. So glad to hear that you didn't end up having more trouble over the sharpening.

-Jim