CYA: Cover Your ASSets. Liability Insurance & Limited Liability Entities


We live in a very litigious time where someone is suing a company or threatening to sue even if the likelihood of their failure is high.

However, most business owners are a small operation and will most likely be responsible for their own representation if they do not have the right form of protection in place.

I understand that costs can get very expensive for business owners, but one area that business owners should never try to save is on the most effective forms of liability protection: 1) liability insurance, and 2) creating the right business entity such as an LLC or Corporation.

Creating a Business Structure:

Many entrepreneurs believe that simply registering a company offer "limited liability" with it's filing and thus are fully protected from any legal issues. This is a false belief. Although registering your business as an LLC or Corporation can provide some forms of legal protection - limited liability - your state will also dictate what your responsibilities are to maintaining the business structure which will afford you the fulls reach of the entity structure to guard against your personal assets. This does not mean that someone or a business will cannot sue the business because it could.

To maximize your protection from lawsuits against your business, there are various forms of liability insurance you should consider.

Liability insurance

Liability insurance varies based on what form of insurance you are seeking. It's important to fully evaluate each form of insurance you are seeking to ensure that it covers what you want and provides you with some added benefits, such as providing a lawyer if an issue was to surface to which you or the business was sued.

Let's take a look at the different forms of liability insurance coverage:

  • General liability insurance, protects your company from common legal issues due to accidents, injury, and negligence. You could stand to lose your entire business if someone is seriously hurt on your property and sues you for damages even if you didn't cause the harm.

  • Product liability insurance, should be used to protect businesses who create and sell products that can lead to lawsuits over the product's safety.

  • Professional liability insurance is for certain service based business such as lawyers, physicians or anyone who has to have a license to practice in their field. This will provide protection for any mistakes made while providing the service that caused the client harm.

  • Employment practices coverage is insurance that protects any issues related to your employees such as discrimination claims in employment. People often overlook this.

  • Umbrella policy is insurance to simply cover you for any damages in excess of your individual policies. This insurance is usually inexpensive and a good idea to have as a backstop.

All businesses should be operating with some form of insurance coverage. For example, it will not make sense to have employment practices coverage if your business does not have any employees, but you may definitely want to have general liability insurance if you operate a simple service and from a brick and mortar location. You may also want to consider having professional liability insurance coverage especially if you had to be licensed to provide the service you're providing.

Create the Right business with the right Insurance:

Not all businesses require a LLC entity registration to have protection. You can create a Corporation and implement certain protections with insurance to ensure your business growth and sustainability.

If you’d like us to help you evaluate your insurance coverage and/or determine which type of business entity is right for your company, contact us as your Innovative Business Lawyer to learn more.

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This article is a service of SL DeBarros Law Firm, LLC, Innovative Business Lawyer. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. We also offer a Business Protection Session or a Business Planning Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

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