If you recently started a business, you may have opted to make it a Limited Liability Corporation (LLC). Some benefits of an LLC include the protection of personal assets and the avoidance of income double taxation. However, despite the advantages of an LLC entity, your business is still at risk.
Here’s more about whether you need business insurance for your LLC.
Protection Of Business Assets
Most of the time, the formation of an LLC guarantees the protection of your personal assets from being used to fulfill business obligations. This means that in the event you are sued, personal assets — such as a house or car — cannot be seized.
However, while your personal assets are protected, you still need to worry about your business assets. If some gets injured in your office or shop and you don't have general liability insurance, you may end up being responsible for any costs related to the injury. Your business assets may be seized to help cover the cost of the injuries. Some examples of business assets that may be seized include equipment, cash, materials, and accounts receivable.
Complete Protection Of Personal Assets
Unfortunately, the protection that an LLC entity offers when it comes to personal assets is not complete. Even if you have an LLC, there are some situations where you may be deemed personally liable. For example, if you mix your personal and business assets together, your personal assets may be at risk in the event you are sued. Also, if you knowingly or unknowingly do something illegal, your personal assets could be at risk.
A common misconception is that business insurance is not required for an LLC. This couldn't be further from the truth. An LLC does not provide complete protection of your personal assets. Also, the protection of business assets is minimal. For more information about why you need business insurance for your LLC, don't hesitate to contact us.
Sources: Hiscox Blog