I came to this revelation today…
It’s much cheaper to create an LLC than it is to purchase liability insurance.
If you’re providing a service, selling a single product, running a business from home that sells online, doing small jobs in the neighborhood, etc. then it’s much cheaper to provide yourself a shield from liability by filing for corporate status as an LLC than it is to buy general liability insurance.
Filing for an LLC in most states is around $150. Getting a minimum BOP policy from a reputable provider is $500. If you’re hoping to protect yourself and personal assets from any wrongdoing claim put an LLC in play and save some money.
I think the caveat to this is that the IRS will shut down your corporation if the revenues are under $5K per year for two years running.
Caveats
Other caveats: if the victim can show that you were not treating corporate assets separately from personal assets, the corporate shield is often no shield at all. Also, you’re still personally liable in cases of fraud and personal wrongdoing while on the job.
I agree it’s very useful for things like property ownership, though. The worst that could happen if someone injures themselves on your property is that you have to shut the corporation down and liquidate the corporate assets to pay a judgment. If you can demonstrate the LLC/S-Corp/C-Corp was its own independent entity and you never co-mingled funds, your personal assets should be off the hook.
It may be cheaper than insurance, but you’re paying with time invested doing the overhead stuff of managing a corporation rather than dollars toward insurance. It’s up to you whether that’s a good trade. If you’re short on dollars and long on time, it probably is.
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Matthew P. Barnson