Ask HN: Using an LLC to protect side project IP

You can't sign two simultaneous agreements assigning your IP to two different companies. Imagine Amazon hires you and has you agree to assign any IP to them. You then get a second (simultaneous) job with Apple and you agree to assign any IP to them. At some point, a court is going to step in if there's a problem and figure out how to unwind the mess. If the second company is an LLC that's owned by you, the court isn't going to be amused and say "well, it's clearly not a scheme by the owner to get out of an assignment clause."

If you've signed away your IP as part of your employment, there isn't going to be One Simple Trick™ to get around that. Even if the court decided "yes, we have to treat this as if you were employed by two companies that have no relation to you," EmploymentCorp could simply sue you for not assigning them the IP, win, and then take your assets as compensation - including your ownership of the LLC.

You personally are still liable for complying with your agreement. If you violate that, your employer might sue you for breaching the agreement. Given that one of your assets is the LLC that "owns" the IP you didn't assign to your employer, that kinda makes it easy. If lots of other people owned a part of the other LLC/company, that makes it harder to unwind, but that doesn't let you or the LLC off the hook. Did the LLC's management know that you had an agreement with EmploymentCorp to give them the IP you were creating? Assuming you're the majority shareholder and/or otherwise in charge, yes. So the LLC knowingly entered into an agreement to "steal" EmploymentCorp's IP (using the word steal a bit loosely here, but it fits enough).

You're basically talking about signing an agreement with your LLC that you know violates your employment agreement and signing the agreement as an officer of the LLC that the LLC knows violates the employment agreement of the person (you). Seems like that creates plenty of liability on both sides of the coin.

Not only that, but it very quickly moves the nature of the liability from civil to criminal, which then has potential further impact on you in the future.

My guess is your company will never know just use different github accounts. If they find out they may fire you but to bring a lawsuit to take the ip would be costly and rarely worth it.

I think it's safe to assume that any such absurdly-wide assignment clause would end up unenforceable in a court of law and can thus be safely ignored.

Since you're apparently not a lawyer, you haven't read the employment contract and you don't even know what state this person lives in, telling them they can safely ignore a contract that they signed seems rather irresponsible.

The only reasonable advice to give here is the usual: Consult a lawyer who is licensed to practice in your local jurisdiction.

I tried googling this, but the SEO spam is so bad I always converge to the same damn sites. Maybe google search for legal layperson questions is the next big thing?

I’m just someone who has taken law courses in undergrad, not a lawyer, and you really should talk to one if you are seriously considering this. They will have much better feedback for your particular situation and questions like this will not be expensive to have answered.

[0]: https://www.nolo.com/legal-encyclopedia/limited-liability-pr...

For context, as a layman, when I Googled this a while ago, the understanding I came away with was that while there can be some benefit to form an LLC in this regard, in reality it's Very Hard (TM) for a 1-person company to truly avoid the risk of the corporate veil getting pierced (regardless of the kind—LLC or whatever). The way I understood it, the entity suing you will look for any and all excuses in your records to try to pierce the corporate veil—and these can include anything from "mixed personal & corporate funds" to "did not properly keep detailed minutes of corporate actions", to other things I'm not aware of. And when there's only 1 person in the company, it's generally more difficult to abide by all the formalities in practice and keep proper documentation of them and convince others that you are indeed keeping doing things properly, whereas with 2+ people, it's much easier, and as a result of that fact (IIRC) judges are apparently much less likely to pierce the corporate veil when there are multiple people in a company.

But as I mentioned, I'm a total layman here, and I would love more info from someone who actually has any legal experience with this kind of concern.

Get your current employer to approve your project through an addendum or find other employment, and in the future do not sign contracts you do not want to follow by the letter.

Ideally, the IP agreement with the employer is limited in scope so that the only IP assigned is that which relates to the employer’s products (e.g., a company that develops medical records software might not claim IP rights to a game the employee develops on the weekend). Unfortunately, many employers use overly-broad agreements, so it’s important to review the agreement. Even if the agreement is broad, the employer may be willing to amend it if the employee is working on something unrelated to the employer’s business and the work won’t affect the employee’s performance. Talk to an attorney in your state before you do anything that jeopardizes something of value to you, and definitely talk to an attorney before you concoct a scheme that opens you up to legal problems ;-)

Source: Attorney / software developer.

*This like everything on this thread is terrible advice. You need a lawyer.

The best thing you could do to protect IP for your side project is to talk to your employer and tell them what you want to work on and get a written exception for it.

If it were me, I’d simply speak with the first company to get my side project exempted.

The proper answer is, consult the precedent of prior cases in your state, that will tell you how strong the LLC holds up in any particular jurisdiction. A lawyer in your area will also know this better than a lawyer in other areas. It’s not a one-size-fits-all answer, and in general the LLC typically holds up well. Regardless of the number of members.

Most employers, especially ones with IP assignment rules, don't allow working for another company at the same time. So off the bat you're going to be having a bad time there.

Next if your employer has an IP assignment section in your contract, assuming you use none of their time (I'm going to bet lawyers will have fun with what that means), and none of their equipment, some states and some countries do not consider such terms enforceable. But in that case you don't need an LLC (and making an LLC puts you in the "don't work for another company" bucket)

The obvious question (for your lawyer, I am not your lawyer, this is not legal advice) would be whether you could even assign your IP to the LLC, if the terms of your contract are enforceable and say your spare time IP belongs to your employer, then that IP is not yours to give to the LLC.

Of course the real think you should be doing is talking to an actual lawyer rather than asking random people on the internet.

> You seem to be looking for a doctor/lawyer/teacher/statistician/psychologist/sysadmin/_____. Asking concrete _____ questions on a public forum is not a substitute.

Does that really have a positive effect, though? In my opinion, it's not a good thing for people, especially those who aren't wealthy to enough to pay every time there's something they want to learn.

They probably know that paying someone hundreds of dollars an hour is the surest way to get a good answer but lack either the ability or the will to pay it.