Is a General Liability Insurance Plan necessary with an LLC?

[Wyrd Wind]

The company is an e-commerce sole-proprietorship company.
With that said, employees work from their homes.
I intend to register it as an L.L.C..

Is a General Liability Insurance Plan really a necessity considering this situation? Goods sold are third party.
Delivery methods are third party.

[coffee_kingdom]

Forming an LLC does not require you to have general liability insurance. General liability covers bodily injury and property damage. I recommend it if you will have a lot customers in and out of your shop/office. Errors & Omissions Insurance covers you if your business makes a mistake in the services offered, causing harm to the other party. This is a good idea, depending on how many assets are held under your LLC that you would like to protect in the case of a lawsuit.

[Albioncollier]

In today's fast paced world, where everyone is in a hurry to make more and more money, life is full of risks. Starting from rash driving to contaminated food products, you constantly face different types of risks.Hence, every thing need security..

[GlobalWealth]

The company is an e-commerce sole-proprietorship company.
With that said, employees work from their homes.
I intend to register it as an L.L.C..

Is a General Liability Insurance Plan really a necessity considering this situation? Goods sold are third party.
Delivery methods are third party.

The LLC will protect you from the activities of the business and if properly structured will protect the business from your personal activities. But it doesn't protect the business from the business and that is the purpose of liablity insurance. Your liablity insurance will be based on your revenue, among other things, and in your case will likely be very cheap. The liablity insurance will protect your business from an issue related to a product sold. For example, if you sell a gas grill that blows up and hurts someone, that is what the insurance would cover. I would recommend shopping around and finding a good insurance agent that can steer you in the proper direction based on your needs. Unfortunately, in today's world, insurance is a cost of business.

[rdc]

I would tend to agree...

While the LLC *may* stop any liability beyond your business assets, you must still keep in mind that if you get sued, you are going to lose your business if you have no insurance (because a lawsuit is likely to wipe out 100% of the business's assets). So while having the LLC may prevent your home and car from being taken, it won't shield your business from a major loss.

Furthermore, the value of single-member (single-owner) LLCs is still somewhat unsettled in courts--they have been (and may continue to be) disregarded, meaning you as a single owner could actually be liable for business torts etc beyond the LLC level (personally). Get some insurance.

[RiskMan1]

General Liability Insurance will protect a business from a variety of liability that they become legally obligated to pay. Ask yourself, "How will my business become legally obligated to pay something?" Yep. You guessed it... You get sued.

I don't know about you, but reputable attorneys in my area are $300+ an hour. If your business is sued how much will it cost to retain an attorney to defend yourself? What if you lose the lawsuit?

One of the biggest advantages of a General Liability policy is that your carrier in most instances will pay for your legal defense and damages up to the policy limits for covered claims. Without this coverage your legal fees and damages will come out of your balance sheet. And probably more important is if you are still operating as a sole proprietorship your personal assets become fair game since you have no corporate veil.

I won't go into the other areas of protection that a General Liability policy covers, but you can find a primer at our website (Inspire Insurance Solutions in the "insurance 101" section. I recommend talking to a reputable independent agent in who specializes in business insurance. They should be able to help you prioritize the risks your business faces and give you insights on which risks to transfer and which ones you should avoid or retain.

Good luck with you endeavors.

Chris J. Baumli, CIC
Certified Insurance Counselor

The company is an e-commerce sole-proprietorship company.
With that said, employees work from their homes.
I intend to register it as an L.L.C..

Is a General Liability Insurance Plan really a necessity considering this situation? Goods sold are third party.
Delivery methods are third party.

[Wyrd Wind]

Ah, thank you all for your insight.

[khushi]

Over 78% of all U.S. businesses are structured as a partnership or sole proprietorship, according to Bizstats.com. For the majority of small business owners, this form of ownership puts your business and personal liabilities at risk. Owning business liability insurance protects both your business and personal life from financial ruin.

A common misconception of a limited liability company (LLC) or an incorporated company is a business owner is protected from personal liability and liability insurance is not necessary. You can be personally liable if:

# you have signed a personal guarantee for a loan

# personally you have injured someone

# you have acted in an irresponsible or illegal manner

# you do not operate your business as a separate entity

Business liability insurance protects your small business in the event of a lawsuit for personal injury or property damages. It will usually cover the damages from a lawsuit along with the legal costs. Depending on your business needs, liability insurance can purchased in many forms.

Types of Business Liability Insurance

General Liability Insurance: This form of business liability insurance is the main coverage to protect your business from: injury claims, property damages, and advertising claims. General liability insurance also known as Commercial General Liability (CGL) may be the only type of business liability insurance you need depending on your business situation.

Professional Liability Insurance: Business owners providing services will need to consider having professional liability insurance known as errors and omissions. This coverage protects your business against malpractice, errors, negligence and omissions. Depending on your profession, it may be a legal requirement to carry such a policy. Doctors require coverage to practice in certain states. Technology consultants often need coverage in independent contractor work arrangements.

Product Liability Insurance: Small businesses selling or manufacturing products should be protected in the event of a person becoming injured as a result of using the product. The amount of coverage and the level of risk depends on your business type. A retailer of scrap book supplies will have far less risks than a wood stove builder.

Thanks

[LLCtaxes]

The LLC is sort of like an insurance policy issued to you by the state without you having to pay a premium. However, only you can decide if insurance is necessary.

[rdc]

Keep in mind that an LLC will not allow you to just do anything you want and avoid liability. It only applies to business acts and transactions, and even then, requirements apply. For example, an LLC must be properly capitalized. Furthermore, if a court determines an LLC is illusory (e.g., you have comingled funds, which most owners do), it can disregard the entity and affect personal liability upon the owner(s).

Note that this tends to occur even more frequently with single-member LLCs (this has been the case law trend). This is due in part to courts' unwillingness to recognize single-member LLCs fully, and also in part due to the tendency of single-member LLC members to go the do-it-yourself route when planning. LLCs are legal in nature, despite the fact that many states have made it simple to "register an LLC" online. This is an unfortunate situation.

Bottom line; you still need insurance if you're running a serious business.