HOW CANNABIS PACKAGING IMPACTS YOUR LIABILITY
WHAT YOU CAN DO TO PROTECT YOUR BUSINESS The cannabis industry is fraught with liability for business owners: changing regulations, counterfeiting, compliance, and cyber security to…
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WHAT YOU CAN DO TO PROTECT YOUR BUSINESS The cannabis industry is fraught with liability for business owners: changing regulations, counterfeiting, compliance, and cyber security to…
What’s new
WHAT YOU CAN DO TO PROTECT YOUR BUSINESS The cannabis industry is fraught with liability for business owners: changing regulations, counterfeiting, compliance, and cyber security to…
General liability insurance protects your business from third-party liability related to bodily injury, property damage or other costs resulting from an accident or incident. General liability coverage is essential for any company that has a physical presence and can expose third parties to risk of bodily injury, property damage or other costs.
Companies get general liability insurance to help manage their liability, but what if the business structure already limits liability? An LLC (Limited Liability Company) limits the liability of the owners, making it unclear if you still need general liability insurance. Let’s take a deeper look at general liability insurance in LLCs.
Does an LLC Still Need General Liability Insurance?
The simple answer is yes, your LLC still needs general liability insurance. This is because the business structure and the insurance do two different things. An LLC limits the liability of the owners by separating the company from the owner. It does not limit overall liability, meaning the business can still be sued. General liability insurance helps the business survive if it is being sued. Forming an LLC protects your personal assets, but you could still lose the business or all of its profits if you don’t have general liability insurance.
What is an LLC?
An LLC is a type of business structure that makes a company less susceptible to third-party liability. In contrast, a sole proprietorship or general partnership is more susceptible to third-party liability. This means that the owners of a general partnership or sole proprietorship have more personal liability if an accident occurs.
In contrast, members of an LLC are not personally responsible for an LLC’s debts and liabilities. An LLC is formed by filing articles of organization with the state, listing the names of the members, their percentage of ownership, and the type of business they will be conducting.
An LLC can be set up as a single-member LLC, which means the LLC is owned by one person. An LLC can also be formed as a multi-member LLC, which means the LLC has more than one owner. An LLC is not required to purchase general liability insurance in most states, but it is a good idea.
How Does an LLC Provide Protection?
An LLC provides protection to its members by separating their personal assets from the liabilities of the business. The member’s personal assets are generally not at risk if the business cannot pay for damages related to a lawsuit.
This protection from personal liability is a big advantage of the LLC business structure. When someone sues an LLC, the members of the LLC are not legally responsible for paying damages out of their own pockets.
Instead, the business is liable for the damages, but it does not have the members’ personal assets to pay those damages. When someone sues the owners of a sole proprietorship or a general partnership, the owners are personally responsible and could lose their personal assets.
Limitations of LLC Protection
While an LLC provides protection from personal liability, it does not always provide protection from third-party liability. An LLC may not protect members from liability if they cause an accident while on the job.
If you’re driving your own car for business purposes, you could be responsible if you cause an accident. If you use your own car and cause an accident while on the job, your liability insurance may not protect you from a lawsuit.
How General Liability Insurance Protects LLCs
General liability insurance protects your business against lawsuits related to bodily injury, property damage, and product liability. If you are sued and the suit is legitimate, your liability insurance will cover the legal expenses related to defending the suit.
Your LLC does not have unlimited resources to weather a lawsuit. Defending itself in legal proceedings is expensive, and the costs can climb quickly as things escalate. Your business could quickly lose all of its assets and be forced to close if it is sued enough.
True, you may not lose your personal assets in the lawsuit. However, you put a lot of time and effort into your business. Losing it can affect your life in numerous ways, and no one wants their business to go under. That is why getting a general liability policy is a good idea. It helps you get the resources that you need to take legal action and whether a lawsuit without losing the company in the process.
How Insurance Works
When your company is sued, the insurance policy can begin to work. It pays out a specific amount based on the policy. For example, if you need to pay a lawyer $10,000 to represent you, the insurance can cover that.
Your general liability policy can stack with other policies as well. If a person gets hurt in your store, your personal injury policy could cover the injury. Your general liability policy can also kick in to cover a certain amount with a specific policy covering beyond that if the costs are high enough.
Get General Liability Insurance for Your LLC
Your LLC should have a general liability insurance plan to help protect itself from potential problems. While the LLC protects you, you need to provide specific protection for the LLC so that you don’t end up losing all of your hard work.
When you create an LLC for your business, you need to consider how your business will be affected by third-party liability. In most cases, an LLC will provide protection from third-party liability. However, it is important to note that this protection is not guaranteed. General liability insurance will protect your business in the event that someone sues your business and wins a damage award. This coverage will ensure third-party liability doesn’t affect your business, protecting you from potentially devastating financial losses.
Millers Insurance Group provides a variety of cannabis insurance options. Please reach out to us or fill out our online form to get an insurance quote today for your company’s insurance needs.
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