Starting a Business in Minneapolis and Your Insurance Needs
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Starting a business in Minneapolis and insurance Needs to be Successful
Starting a new business in Minneapolis can be a challenging but rewarding venture. As a business owner, you are responsible for ensuring the success of your business while also taking care of your employees and customers. One of the most critical aspects of starting a business is getting the right insurance. In this article, we will discuss the different types of insurance needed for businesses with a focus on Minneapolis Minnesota, as well as the advantages of forming a Limited Liability Company (LLC).
Types of Insurance for Businesses in Minneapolis
There are several types of insurance that businesses in Minneapolis should consider purchasing. These include:
1. General Liability Insurance: This type of insurance covers the costs associated with property damage and bodily injury to a third party that results from your business operations. Depending on your business, general liability insurance is often required by law and is essential for protecting your business. It should also be noted that if you’re outside of the Twin Cities, or operating outside in the various communities, the insurance requirements for permits may differ. In other words, just because one specific location requires or doesn’t require insurance doesn’t mean another location is the same.
2. Property Insurance: Property insurance covers your business property, such as your building, equipment, and inventory, from damage or loss due to fire, theft, or other covered perils. There are several main types of insurance coverage for your business property. Real property is buildings and improvements on the land, while anything else (generally speaking) is considered personal property (we won’t go into intellectual and other types of property here). For business personal property, there are two main types for insurance purposes (leaving motor vehicles out and described below). The first type is called the same as the legal definition, namely business personal property. Business personal property is the property that stays at the business location. The other type for insurance purposes is called “inland marine.” Inland marine is business personal property that moves about and often isn’t at the business address. As you may expect, inland marine insurance costs more than business personal property because it’s usually at greater risk of loss (from theft, as well as simply being moved around).
3. Workers’ Compensation Insurance: Workers’ compensation insurance provides coverage for medical expenses and lost wages for employees who are injured or become ill while on the job. This is different than Employer’s Liability (although often sold on the same policy as workers’ comp), which covers employers for claims of discrimination in hiring, firing, and the like.
4. Commercial Auto Insurance: Commercial auto insurance covers vehicles used for business purposes. This type of insurance can protect your business from liability in case of an accident. It can also cover the vehicles from a loss too, including collision and “other than collision” often known as comprehensive. Combined, collision and comprehensive is generally referred to as “physical damage” for commercial auto insurance.
5. Professional Liability Insurance: This type of insurance protects businesses that provide professional services from lawsuits due to errors or omissions. This is meant to cover financial losses due to negligence, and is different than general liability that covers an injury (injury could be bodily injury or property damage).
Advantages of Forming a Limited Liability Company (LLC)
Many new businesses create a formal business entity to limit the owners’ liability for the acts of the business. One of the most popular business entities for small businesses is the Limited Liability Company (LLC). An LLC offers several advantages over other business entities, including:
1. Limited Liability: As the name suggests, an LLC provides limited liability protection to its owners, which means that the owners are not personally liable for the debts and obligations of the business.
2. Flexibility: LLCs are incredibly flexible in terms of ownership structure, management, and taxation. LLCs can be owned by individuals, corporations, or other LLCs, and the management structure can be set up in a variety of ways.
3. Tax Benefits: LLCs offer several tax benefits, including the ability to choose how the business is taxed. LLCs can be taxed as a partnership, sole proprietorship, or corporation, depending on the needs of the business. To learn more about how to tax a LLC business, click here.
4. Simple Compliance: LLCs are easy to set up and maintain, with few compliance requirements compared to other business entities such as corporations which require more formalities to maintain.
5. Credibility: Forming an LLC can add credibility to your business, making it easier to obtain financing and attract customers.
Conclusion
Starting a business in Minneapolis Minnesota can be a challenging but rewarding venture. As a business owner, it is critical to ensure that you have the right insurance to protect your business and employees. It is also essential to choose the right business entity, such as an LLC, to take advantage of the flexibility, tax benefits, and limited liability protection that it offers. With the right insurance and business entity, you can set your business up for success and achieve your goals.
If you would like to talk about your business liability and protecting yourself and your new (or old) company, give us a call to learn how we can help you.