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Is Liability Insurance enough? Or should I be an LLC?

by Lisa Stuebing
(Seattle)

I am working on my business plan and I have been weighing the pros and cons of being either Sole Proprietorship or a Limited Liablity Company. (Sometimes called Limited Liability Corporation -- LLC).

The advantages of being an LLC appear to be: 1.) A slight tax advantage, however on Federal taxes you are still taxed as a Sole Prop., 2.) Personal protection from debt, 3.) Limited liability in case of lawsuit.

The drawbacks are: 1.) Greater expense to create and maintain an LLC, 2.) Loss of LLC status if you are not meticulous in maintaining the multiple extra legal requirements, (you revert to Sole Prop.). The coporate veil is pierced, as they say.

My main concern is liability. Is it possilbe to carry enough insurance to protect my personal assets? How much insurance is a good bet - $1 M or $500 K or ....? If so, it seems that Sole Prop. is the way to go.

This site is awesome! Thanks for this service!

Lisa Stuebing
Seattle

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Should I form a LLC or sole proprietor
by: senseigreg

My martial arts master is a sole proprietor and went to law school in the 60s and thinks thats enough if you have insurance

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LLC might be a good IDEA
by: Anonymous

LLC will protect "you" from liability. Your LLC will be on the hook for any claim made against it.

Insurance protects you or your LLC (especially if it's profitable) However your waiver should protect you from any and all claims. However that doesn't stop anyone does it.

The LLC set up is a one time cost around 150-300 if you do it yourself. You need to maintain a registered agent with will cost (free-175+) per year.

IF you are a successfull trainer and your have a booming business LLC is a great way to protect yourself combined with waiver and insurance you are basically air tight.

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Is llc enough?
by: Anonymous

Is establishing an llc enough or do you still need to carry liabilty insurance? Isn't that what an llc is for? Limited liabilty company?

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Insurance is a must
by: Katie - Admin

An LLC won't pay to defend you in court. Very few personal trainers would be able to pay for an adequate legal defense on their own. Without insurance your business would be ruined.

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Business Assets Insurance

by Lori
(TX)

I am a sole proprietor who is starting an online personal training business. It appears that individual liability insurance would cover me personally and any personal assets. Would it not cover business assets, as well? If not, what insurance should I obtain?

Thanks,
Lori - NASM

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Not a separate entity
by: Anonymous

SO in TX an LLC would have been the way to go.
This creates a separate legal entity from yourself.

A sole Proprietorship is not a separate entity from yourself. Therefore all liability still stands with you.

A LLC takes away the liability burden from YOU.
Insurance can be bought under the LLC's name. You are still the person the insurance company will underwrite for rates but claims will go against the LLC and not you.

Basically if you get sued the client can only go after the LLC or your "company" assets and not your home and other personal assets.

Other than insurance you should be sure to have a strong, well worded waiver. This will protect your from most liability and claims up to the point of gross neglegence.

Since you are not a LLC the combination of waiver and additional liability insurance will probably keep you our of trouble. I would suggest a minimum of 500K per claim.

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Independent contractor & liability

by Amy
(Pennsylvania)

I have my own LLC for teaching group fitness. I have a high demand for my classes and I am looking at hiring another instructor to cover some of my classes. I don't plan to hire this person as an employee but as an independent contractor. My question is do they need to carry their own liability insurance or are they covered under mine?

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