When you formed your business, you may have decided to make the entity a Limited Liability Corporation (LLC) to protect your personal assets. However, far too often, business owners mistakenly think that an LLC will protect their business assets as well as their personal ones. While sole proprietors take out business insurance in Texas in order to safeguard their business and personal assets, LLCs must also consider securing coverage in case they are held liable.
Why an LLC Needs Liability Insurance
An LLC does not limit your business risks. Unlike a sole proprietorship, an LLC will protect your personal finances from business debts and lawsuits. However, when it comes to risk, an LLC is just like any other business structure. There are many situations in which an LLC can be threatened, such as:
- A slip and fall injury – If a customer slips and falls and injures themselves on your property, he or she could file a lawsuit against you. You’ll be held responsible and may be required to pay for their medical costs and other associated expenses. With an LLC, you won’t be required to pay the damages with your personal finances. However, all of your business’s financial assets could be considered in a judgment.
- A work-related injury – One of your employees could be injured on the job, which you can rely on your workers’ compensation for help. If you do not have this coverage, you could possibly risk fines and even jail time.
- A missed deadline – If you miss a deadline on a client’s project, it could cost them money. If they sue and you’re held liable, you may have to pay for their losses. An LLC offers no additional protection over other business structures when it comes to your business assets.
With so many risks, it is essential to secure liability insurance.
Your Personal Assets Could Still Be at Risk
There are a number of circumstances under which you could be personally liable, even if your business is an LLC. For example, if you don’t keep your business and personal assets completely separate, or if you personally guarantee a business loan, a lawsuit against your business could put personal assets at risk. If you do something illegal, even if you do not know at the time it is illegal, your personal property and possessions could be in jeopardy.
Insurance to Protect Your LLC and Business Assets
The insurance policies you should buy for your LLC will largely depend on the type of business you’re in. Generally, a combination of policies is needed to protect a business from liability claims.
- General liability insurance covers typical risks your business might face, such as customer injuries, customer property damage, and advertising injuries such as copyright infringement.
- Professional liability coverage covers legal fees, settlements, and judgments if a client sues your business for unsatisfactory work. Also called Errors and Omissions insurance, it is important coverage for any organization that sells its expertise or provides professional services.
- Workers’ compensation is not required in Texas, but it is highly recommended. This protects your employees if they are injured on the job.
- Cyber liability insurance is essential if your business operates online. A data breach or cyber attack can see your business’s sensitive information fall into the wrong hands. It can be expensive to recover.
- Commercial auto insurance protects your business from the costs of accidents while driving for business as well as covering company-owned vehicles.
There are many ways to protect your business, whether it’s an LLC or you act as a sole proprietor. The right business insurance in Texas should address your risks while staying in line with your budget. At J. Archer Insurance Group, our experts help you find the best coverage for your needs. Serving Houston, Texas and beyond, contact us today.