How would you advise them to set up their business structure?

Set up an “operating entity” rather than being a sole proprietor.

Establish a “trust” to hold your operating entity.

Separate your intellectual property from your business.

Establish a solo 401(k) for your business.

Name your business with funding in mind.

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

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