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An LLC (Limited Liability Company) is an excellent structure for a small or even medium-sized business. It is appealing because it is simple to get started and it can protect the personal assets of the business owner in a liability claim. Some business owners however, make the mistake of viewing this protection as a replacement for business insurance. Here are some reasons why your LLC still needs business insurance.
An LLC Doesn’t Protect Your Business Assets
While an LLC offers protection of your home and personal assets from claims made against the business, your business assets are still at risk. Your cash, inventory, equipment and real estate may be at risk without appropriate business insurance. Even accounts receivable may be attached in a successful claim. This can be difficult if not impossible to recover from.
An LLC Does Not Protect You From Legal Expenses
Even if a claim against your LLC is unsuccessful, it still can lead to significant legal expenses. Without business insurance, these are expenses that will have to be paid out of your cash flow or assets. Business liability insurance however, will not only pay any judgment or settlement, but any legal costs associated with the covered claim.
Even with an LLC, Personal Assets May Be at Risk
Some business owners are not aware that even with an LLC, their personal assets may still be at risk under certain circumstances. For example, if you take out a personal loan or personally guarantee a business loan. If your company is involved in some sort of illegal activity, intentional or not, your could be placing personal assets at risk.
You should not be under the false impression an LLC provides the protection of a well-designed business insurance program. To discuss your business and where you are at risk, we invite you to contact one of our independent insurance professionals. With relationships with multiple business insurance companies, our agents can find a plan to fit your company and budget.
An LLC may provide some protections, but it is not insurance. Connect with us to learn more.