I just got license about a month ago. And I am trying to start my business but i have a few questions. My first question is what exactly do I want to look for as far as insurance coverage? And how do I protect my personal assets from somebody suing me if something was to happen? Also I am setting up my company as a LLC. Any advice would be great thanks!
Insurance
- Thread starter A1cbr
- Start date
- Status
77401
Banned
Your smart for doing the insurance first!
your state or Local AHJ will have minimun requirements for insurance. But thats minumun... for a few dollars more you can get higher coverage. Most Commercial jobs now want 1-2 Million coverage.
Then if you have any personal wealth or assets you should have already have an Umbrella policy. Your local company that writes your HO policly will take care of that.
your state or Local AHJ will have minimun requirements for insurance. But thats minumun... for a few dollars more you can get higher coverage. Most Commercial jobs now want 1-2 Million coverage.
Then if you have any personal wealth or assets you should have already have an Umbrella policy. Your local company that writes your HO policly will take care of that.
Quote "your state or Local AHJ will have minimun requirements for insurance. But thats minumun."
There is the minimun policy, usually refered to as "wiring within buildings", this offers little or next to no protection regardless of limit selected, this policy can run from $450 to $800 depending on your location. and years in business, policy is year to year coverage, with no continued protection, or errors and ommisions.
Then there is there are real coverages, usually known as contractors insurance, it offers the most protection, and can run from $1400 up to 7,000, depending on business years in business, assets, and operations, this type of policy has continued operations, and includes errors and ommisions.
Then there is the workers comp insurance, you will hear the story, oh they don't require me to carry comp, i am a one man, non incorporated company, well, the state may not require it, but no sane company, or homeowner, would let you work on their property, without it.
Some of the best advice given here, was to retain legal advice, start off with a professsional helping.
There is the minimun policy, usually refered to as "wiring within buildings", this offers little or next to no protection regardless of limit selected, this policy can run from $450 to $800 depending on your location. and years in business, policy is year to year coverage, with no continued protection, or errors and ommisions.
Then there is there are real coverages, usually known as contractors insurance, it offers the most protection, and can run from $1400 up to 7,000, depending on business years in business, assets, and operations, this type of policy has continued operations, and includes errors and ommisions.
Then there is the workers comp insurance, you will hear the story, oh they don't require me to carry comp, i am a one man, non incorporated company, well, the state may not require it, but no sane company, or homeowner, would let you work on their property, without it.
Some of the best advice given here, was to retain legal advice, start off with a professsional helping.
petersonra
Senior Member
- Location
- Northern illinois
- Occupation
- engineer
A1cbr said:
Your best bet is to pay some professionals to help you set up your business correctly. I would suggest a few thousand dollars spent on legal and accounting advice BEFORE you make the jump is money well spent.
Considering how offended some people are on this board by amateurs doing electrical work, I am amazed that they think it is OK for amateurs to do accounting and legal work.
JohnE
Senior Member
- Location
- Milford, MA
Setting up as a Corporation might somewhat separate your business and personal assets in the event of a lawsuit. But if something serious happened, that "corporate veil" for a one man show will probably be pierced. If you want protection, pay for higher coverages. In MA, general liability is capped at 1 million per claim, which is why you'd opt for an additional umbrella policy of 1 - 2 million.
If you're just starting out, ask around and get a good insurance agent, accountant, and attorney. It will be time and money well spent.
Good luck,
John
If you're just starting out, ask around and get a good insurance agent, accountant, and attorney. It will be time and money well spent.
Good luck,
John
IMO, if you are a one man shop, incorporating does nothing for you.
Incorporating will only protect you from the liability of your employees.
Setting up an LLC as a sole proprietor gives you no protection at all. It just increases the paperwork, taxes and accounting and legal fees.
Incorporating will only protect you from the liability of your employees.
Setting up an LLC as a sole proprietor gives you no protection at all. It just increases the paperwork, taxes and accounting and legal fees.
rhombus65 said:
LLC does offer protections, and does not increase paperwork, here is a good site that explains all the good and bad of LLC, always best to get legal advice with any business activity.
http://www.nolo.com/article.cfm/objectID/D7043E4E-91CB-4B29-B8DC0DDA10AD4B3B/111/182/245/ART/
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
rhombus65 said:
I disagree.
Let's say you make $70,000 one year. As a S-Corp or LLC that has elected to be taxed as a Corp then as a S-Corp (two different forms) you can salary yourself at $30,000/year and avoid paying 15.3% in SS/Medicade taxes.
That would amount to $6,120 for you to invest yourself.
jeff43222
Senior Member
- Location
- Minneapolis, Minnesota
I talked to a couple of different lawyers before I started up, and they both told me that there was no advantage for me to incorporate in terms of liability protection, but there may be an advantage in terms of taxes, for the reason hardworkingstiff mentioned.
jeff43222 said:
Every case is different, if you had few assets at the time, and nothing to protect, then the advise, may have been good, if not, then you may want to consult with another lawyer.
When i started, not one lawyer suggested, going without, even the CPA suggested, Inc. or LLC.
Satcom:
Even your link says you can still be held personally liable for work that you do. An LLC does not protect you from the liability of your own work. It only protects you from the liability of your employees work.
If you are a one man shop than an LLC or S-Corp does nothing for you.
As for liability of debt. Find me a creditor that will give credit to a one man shop without a personnal gaurentee
Hardworkingstiff:
You would have to pay corporate income tax on the money you left in the company and corporations are taxed at a much higher rate so you would not save anything.
Even your link says you can still be held personally liable for work that you do. An LLC does not protect you from the liability of your own work. It only protects you from the liability of your employees work.
If you are a one man shop than an LLC or S-Corp does nothing for you.
As for liability of debt. Find me a creditor that will give credit to a one man shop without a personnal gaurentee
Hardworkingstiff:
You would have to pay corporate income tax on the money you left in the company and corporations are taxed at a much higher rate so you would not save anything.
hardworkingstiff
Senior Member
- Location
- Wilmington, NC
rhombus65 said:
That is true of C-Corps but S-Corps and LLC's that elect to be taxed as a S-Corp pass thru to the owners and the Corps don't pay any taxes.
But...... I wasn't even talking about income taxes.
JohnE
Senior Member
- Location
- Milford, MA
rhombus65 said:
As I've mentioned in other posts, my sister-in -law is CFO of a 150 million dollar company. Small company with only about 20 employees. It wasn't until the past year that they are getting credit without a personal guarantee, for what that's worth.
JohnE
Senior Member
- Location
- Milford, MA
I meant small in terms of number of employees.
They have an incredible business as basically a reseller of telecom equipment. Have won numerous business awards. My point was that until recently even they had to sign a personal guarantee for credit.
John
They have an incredible business as basically a reseller of telecom equipment. Have won numerous business awards. My point was that until recently even they had to sign a personal guarantee for credit.
John
hbiss
EC, Westchester, New York NEC: 2014
- Location
- Hawthorne, New York NEC: 2014
- Occupation
- EC
Then there is the workers comp insurance, you will hear the story, oh they don't require me to carry comp, i am a one man, non incorporated company, well, the state may not require it, but no sane company, or homeowner, would let you work on their property, without it.
That's a real sore point. I am a one man shop, sole proprietor, and for many years I used to have a workman's comp policy. It wouldn't cover me and had no employees on it. It was basically a "I may hire an employee any time now" policy that was worthless but cost me $600 a year just to satisfy those few "sane" customers who wanted to see a workman's comp policy.
Then one day my agent tells me that the insurance carrier will no longer maintain a workman's comp policy under such conditions. Either hire somebody or no workman's comp for you. Matter of fact another contractor I know actually hired someone just so he could have a comp policy. The kicker is that as the owner he himself is not covered.
According to state law (NY) I am not required to carry workman's comp on myself. My agent tells me that if such coverage is available it is prohibitively expensive.
So my question is, while I understand customer concerns, where can you get coverage on yourself and how much are you going to pay? I think the system needs to be changed. For one man shops either provide affordable coverage or the customer's insurance should cover such workers.
-Hal
That's a real sore point. I am a one man shop, sole proprietor, and for many years I used to have a workman's comp policy. It wouldn't cover me and had no employees on it. It was basically a "I may hire an employee any time now" policy that was worthless but cost me $600 a year just to satisfy those few "sane" customers who wanted to see a workman's comp policy.
Then one day my agent tells me that the insurance carrier will no longer maintain a workman's comp policy under such conditions. Either hire somebody or no workman's comp for you. Matter of fact another contractor I know actually hired someone just so he could have a comp policy. The kicker is that as the owner he himself is not covered.
According to state law (NY) I am not required to carry workman's comp on myself. My agent tells me that if such coverage is available it is prohibitively expensive.
So my question is, while I understand customer concerns, where can you get coverage on yourself and how much are you going to pay? I think the system needs to be changed. For one man shops either provide affordable coverage or the customer's insurance should cover such workers.
-Hal
hbiss said:
If customer is paying for such insurance; why shouldn't customers insurance pay for any workers on their property. I once started a job in a community that required a performance bond be issued prior to issuing a permit. My insurance agent didn't agree that it should be necessary, but got one issued at a cost of $450. Now between bond and permit I had just under $1,000 tied up. I started job at 2:00 the afternoon permit was issued. The following morning at 9:30 AM building dept shows up and issues an cease and desist order stopping all work until all the proper permits have been pulled. They were nice about it though; they said I could finish out the day if I wanted. The result of all this was I had a builder, and a plumber mad at me for pulling a permit. All they did was walk away from the job. Said they couldn't afford bonding and permitting for that work. Owner couldn't get anyone else to do their work for price he was willing to pay. I do not know the status of that job now, but as far as I know it was never completed.
The court ruled I couldn't collect from the owner for work I had not completed even when I had a contract.
Kind of ironic. I tried to follow the law and it cost me. My contracts have improved since then, though.
hbiss
EC, Westchester, New York NEC: 2014
- Location
- Hawthorne, New York NEC: 2014
- Occupation
- EC
If customer is paying for such insurance; why shouldn't customers insurance pay for any workers on their property.
An employer should be responsible for the people working for him, not his customer. But, unless he is a corporation the owner is not an employee and even if he had the required comp policy it would cover his employees, not him.
How many customers realize that the owner, who may be working along with his employees has no comp coverage even when they have a certificate saying the company has insurance? So, what difference does it make if the owner has no employees and no comp policy? He wouldn't be covered anyway.
I believe that as far as the business owner is concerned he is actually employed by the customer and it should be the customer's responsibility to maintain coverage for such workers. This is evidently the theory behind states exempting sole proprietors having no employees.
I think where this is coming from is the insurance companies and property owners who want to keep liability and costs down.
-Hal
An employer should be responsible for the people working for him, not his customer. But, unless he is a corporation the owner is not an employee and even if he had the required comp policy it would cover his employees, not him.
How many customers realize that the owner, who may be working along with his employees has no comp coverage even when they have a certificate saying the company has insurance? So, what difference does it make if the owner has no employees and no comp policy? He wouldn't be covered anyway.
I believe that as far as the business owner is concerned he is actually employed by the customer and it should be the customer's responsibility to maintain coverage for such workers. This is evidently the theory behind states exempting sole proprietors having no employees.
I think where this is coming from is the insurance companies and property owners who want to keep liability and costs down.
-Hal
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