Do You Think You Need Insurance Policy If You Own a Single Member LLC?
– Do you think you need insurance policy if you have an LLC? – Yes, oh my god yes. I don’t understand these people that give this terrible advice. – Whoa Shreya, tease the video a little bit. (laughs) People are already gonna have tuned out.
– Are they though? Or will they be brought in by my passionate response? – You gave ’em the answer though. (laughs) They’re done. – That’s okay. – Oh I don’t have my smart glasses. Anyway, that was a question Shreya Ley here received today while talking to a business owner.
– Yeah. – Tell the story about this, you know, anonymize it and stuff. – A business owner called me. They have been doing businesses for some time now. They started out as a, oh my gosh you’re so much smarter already.
– Keep going. (laughs) – They started out as a sole proprietor and then they switched to an LLC. Thus is the progression of a lot of businesses and when they did that, they have a business mentor or maybe mentors, somebody gave them advice, somebody they trust gave them advice that they could just drop their business insurance, now that they had an LLC.
Because LLCs will protect you, no matter what and you don’t need insurance anymore. And I panicked a little bit inside and tried to stop myself from forcefully saying like “No, that’s all false, this is all wrong”.
And instead I told a story to help them see the error of their ways. – Yeah I mean, lets throw it down a little bit. – Sure. – Why will you refuse to do that? And don’t wanna put you on the spot, I know the answers if you want me to tell ’em.
– Oh yeah, why don’t you weigh in, Colin Ley? – Well first of all, insurance for protecting any asset, your business, your personal assets, whatever, insurance should be your first stop because it’s typically the cheapest form of protecting yourself and one of the greatest benefits of having insurance is having the insurance attorney team on your side, so if this sole proprietor turned LLC owner gets in some sort of legal trouble, hopefully it’s a claim that’s covered under the policy and their– – And then their attorneys will help to defend the business owner.
– They’ll roll in their and be like “No, you guys are wrong!” – So the owner of the businesses will not be required to pullout a $30k to the litigator on retainer, litigator whatever. I was saying litigation– – Alligator? – and then litigator, I don’t know.
(laughs) – $30,000, that’s cheap. The average lawsuit I think is somewhere between like 50 and 100 thousand dollars. – Yeah. – So you don’t want that covered under your insurance? – Well and didn’t we speak, well I was reading, never mind about speaking to someone.
I was reading “Bad Blood” and they were talking about how this lawsuit cost the defendants like 2 million dollars to defend themselves. That’s ridiculous. – Yeah, very expensive. The other thing is, so I imagine what this advisor was thinking of was is that “Oh the LLC gets sued” and then it just gets kinda stuck there inside the LLC and nobody (coughs) Excuse me.
And nobody then has to pay the judgment or the liability that comes up. But if that were the sake– – Who pays the attorneys? (laughs) – Conspiracy theory? – No! (laughs) They still have to hire an attorney to defend yourself from the lawsuit– – Yeah yeah, that’s step one.
But then, so if there’s a judgment against you and you had no insurance, they’re gonna come to the LLC and look to take the assets of the LLC to cover the judgment since there’s no insurance.
But say there aren’t sufficient assets in the business, in the LLC, then that creditor is just gonna (popping sound) pop right through that LLC and come after you personally. And then they’re coming to take your home, they’re taking your money, they’re taking your car.
You’re gonna be driving around a $3,000 dollar Honda Civic. Or maybe a 1992 Ford– – Ford Escort! – Ford Escort, which is nothing to be ashamed of (laughs) 33 miles per gallon, classic. – Yeah. (laughter) Sure
.But you know, I think the– – So is that worth the risk? I mean it’s tempting to get a 1992 Ford Escort but it’s probably a lot easier to just have your business liability insurance. – When Colin, as an aside, suggested that I buy myself a 1992 Ford Escort not that long ago, I turned to him and I said “Why don’t you drive that car?” – Yes, and its a correction,that was not the real info, it’s actually 1990 Escort, that’s the one you want.
’92, it gets all weird. ’90 is nice and boxy. Beautiful colors, wonderful interior. – Sure, sure. – And so,which ever, what were we discussing about? – Oh, you still need insurance. – Don’t ditch your liability insurance when you go from being a sole proprietor to an LLC owner.
– Yeah. – It’s a poor decision I think. – Yeah, I would say that it’s an ill informed decision. Then, once you’re ready to level up even further and you got those personal assets that you wanna protect from your business, asset protection bro.
– That gonna be our catchphrase? Asset protection bro. (laughs) Anyway, if you found this helpful, maybe you know a sole proprietor who turned LLC owner. If so, maybe share this video. Give it a like. Hope that the question Do you think you need insurance policy if you have an LLC have been answered in this article.
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