Small Business Limited Liability Insurance Information: A Brief Summary of LLP Insurance
All companies must have some type of insurance, but what about associations? If you have any property in a business deal, but not the entire organization as a whole, you should only be required to insure your part. That’s what small business limited liability insurance is for. Why should you be responsible for everything? If you have a limited role in day-to-day business practices and operations, you should only have to pay for coverage of your own assets.
The term “limited partnership” refers to a partnership in which there is at least one general partner and one limited partner. The general partner generally has the same role as in a general partnership, as someone who controls the day-to-day operations of the business and is held personally liable for debts associated with the business.
The “limited partner”, as mentioned above, does not have much to say in the day-to-day operations and decisions of the business. There may be more than one limited partner involved in a small business. To compensate for not taking an active role in decisions, you get the benefit of not having to pay claims or business debts with personal assets. However, the limited partner can still potentially lose his financial investment in the company depending on the circumstances.
What else to look for in small business limited liability insurance
Another thing to consider when looking for limited liability insurance for small businesses is that the tax rules are somewhat different. All partners must report and pay taxes individually on their share of annual profits. You will probably not have to pay self-employment taxes since your status in business is not “active” so your participation in the partnership is not considered “earned income.” General partners, on the other hand, control the day-to-day operations of the business and are therefore liable for business debts.
There is another type of partnership called a “limited liability company” or LLP, in which all owners have limited personal responsibilities. In this type of situation, LLPs tend to be professionals like accountants or lawyers. In certain states, only professionals can be LLPs.
An LLP requires less paperwork than corporations and LLCs. Learn the rules in your state, pay the applicable filing fee, and create the partnership agreement.
This is just a brief overview of small business limited liability insurance. To learn more about your options, see Hiscox Business Insurance and the benefits this company offers. There are a variety of personalized small business insurance plans to suit your needs.