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A Closer Look At Insurance for LLCs

A Closer Look At Insurance for LLCs

As we have previously discussed, LLCs are a great way to protect company assets, but this corporate structure is not a replacement for actual insurance coverage. Insurance for LLCs should still be a consideration. Let’s take a closer look at why. You Can Still Be Sued In an article on Legal Zoom about LLCs, it is noted that forming an LLC makes a company a separate entity from the company owners. In the eyes of the law, the company “can own money and property, have a bank account, make agreements, sue people, and be sued.” While the corporate structure may protect individual owners from legal liability for company activities, it does not protect the company from being sued. Lawsuits cost money. The best prepaid legal option a company can have is a solid commercial general liability policy to protect against both nuisance claims and legitimate lawsuits. There’s an insurance policy for that: General Liability. You Can Still Make Mistakes Many professional businesses such as lawyers and doctors cannot form LLCs in certain states. If your business is formed as an LLC the corporate structure does not protect you or the business from decisions made by professionals within your company that result in damage or loss to your customers. There’s an insurance policy for that: Professional Liability / Errors & Omissions You Can Still Suffer A Property Loss The physical assets of your business such as your equipment, furnishings, and buildings are still vulnerable to damage or loss. Fire, theft, hurricanes, earthquakes, floods and other natural disasters won’t stop at your front door due to your corporate structure. There are...
Do Limited Liability Companies Need Insurance?

Do Limited Liability Companies Need Insurance?

It is a common misconception when setting up a Limited Liability Company, or LLC: the very name says liability is limited. Therefore, no insurance is needed, right? Wrong. While LLCs do offer some protection, it doesn’t negate the need for insurance. Let’s examine why. What Is An LLC? An LLC is a form of business ownership that is designed to protect the personal assets of its managers and members from business liability. The structure itself is easier to maintain than a corporation, as there are no board meetings required or articles of incorporation to be filed. Do LLCs Really Limit Liability? LLCs limit liability in certain ways. If the LLC defaults on a loan, the individual LLC members and managers may not be sued personally on behalf of the LLC due to the corporate structure. Piercing the corporate veil proves to be more difficult than a corporation since there are fewer hoops for LLCs to jump through, so less opportunity for mistakes to be made. While this does offer protection to the members and managers of the company in the event of a lawsuit, it does not protect the LLC from being sued. Does that make a difference? What If My Company Gets Sued? The structure of the LLC protects the individual members and managers from personal liability for corporate decisions, which is a good thing. However, the LLC cannot protect itself from being sued simply by being an LLC. For instance: If you own a small retail shop and someone falls and gets injured while on your premises, they may sue your company. If someone becomes ill or...