Do you need small business insurance for your LLC? A Limited Liability Company (LLC) is designed to separate business assets from the personal belongings of the business owner. One of the main benefits of this is that it protects personal assets from being used to satisfy financial obligations that the business may incur. In other words, it protects you from losing your house if your business is sued. Read on to learn more about why small business insurance is still necessary for an LLC.
Protecting Your Assets
Possibly due to the clear separation of personal and business assets, or the term “limited liability,” there’s a popular misconception that LLC business owners don’t require small business insurance. This is simply not true. Like any small business, LLCs need to be properly insured. Let’s review a few reasons why…
Although an LLC protects your personal belongings, it does not protect your company. Unfortunately, if your business is ever sued, its assets are left vulnerable during litigation. For instance, if someone were to be injured at your company, your business can be held responsible for medical bills and damages. A court could decide that any assets the business has, like equipment, can be liquidated (converted into cash) to pay the injured party. This, plus attorney fees and court costs, can very quickly add up to large sums of money.
Another valid reason to insure your LLC is to provide an extra level of protection to your personal assets. Although you may have set up the LLC specifically to protect these assets, there are still loopholes and circumstances in which they can still be at risk. Let’s say you used personal belongings as part of the collateral to secure a loan for your business. This opens the door for your personal belongings to become part of a settlement if your business is sued.
Small Business Insurance for Your LLC
Given the importance of small business insurance for LLCs, it’s good to know more about the kinds of insurance options that are available. One of the most important is general liability insurance. This protects your business from claims of property damage and bodily injury. It ensures you don’t have to liquidate business assets to pay for an injured person’s medical bills.
In addition to general liability insurance, there are other forms of insurance that can safeguard your LLC. Workers compensation insurance helps your employees in the event that they suffer from a work-related injury. This includes large costs, such as medical procedures, that could fall on the employer without proper insurance. Similarly, commercial auto and commercial property insurance protects vehicles and physical locations that the LLC may own.
So, don’t be fooled by the myths. Small business insurance is key to protecting your LLC business and your personal assets. If you need more information, contact Michael McGann, your local Farmers® agent in Livermore, CA. His office can be reached at (925) 447-1744, or click here to send a message.