Small Business Limited Liability Insurance Information

Small business liability insurance is a safety net.

In a world where a small mistake can lead to major financial obligations, the way a company organizes can act as a safety net against the owner's personal assets being put in jeopardy. Owners can take further steps to protect personal assets through the purchase of a liability insurance policy.

Limited Liability

A limited liability company is an organizational structure that prohibits creditors from taking an owner's personal assets, such as a home or property, to cover business debts in most instances.

Exception

The LLC business structure does not protect personal assets if the owners are negligent in doing business in a fair and legal manner or if they fail to adequately fund the operation, nor will it protect owner assets if the owner puts up personal assets as collateral for a business debt. Two other key points in maintaining LLC protections include formally creating an LLC operating agreement and keeping business and personal assets and liabilities separate.

Liability Insurance

Liability insurance can cover some of the gap that is not covered by the LLC organization. Most prominent among the protections is against creditors attacking personal assets in the event of an accidental business-related injury.

References

• Nolo: LLC Basics