Insurance vs an LLC | Mark J Kohler | CPA | Attorney - YouTube

I hear it all the time. In fact this last week. I've heard it twice from clients first phrase. Oh

All I need is an LLC then I don't have to buy insurance or even better yet from my California clients

I'm just gonna get insurance because I don't want to pay those excessive fees. So I don't need to have an LLC

I'll just get insurance. Which ones right are these myths are they facts? What do I do? Let's break it down

There are so many urban legends and myths out there misinformation

I don't know where to start but I'm just gonna try to make the best list

I can let's start with umbrella insurance. So many people think umbrella insurance is all I need and I'm good

Hey umbrella insurance is great. And what it does is cover the excess claims that could happen

After your regular insurance doesn't pay out

Due to policy limits or exclusions and then you get umbrella policies to fill in the gaps or the excess umbrella insurance is great

But you don't get it and that's all it

Really is on top of a landlord policy if your landlord or a general liability policy if you're a business owner

You just don't get umbrella insurance and think you're done and I know in, California

You don't want to spend the 800 bucks for it LLC. And so you're just going to get an umbrella policy

Guys, it doesn't cut it. Yeah, the umbrella policy comes in after your regular insurance. And then you start adding up umbrella

Insurance premiums and is it worth it? And should I just have an LLC?

so think twice about just hanging your hat on umbrella policies as your only insurance so that you can avoid

Getting an LLC or a corporation

Next a common fallacy is either or that I can do an LLC or insurance, but I don't have to do both now

This is complicated. Let me make this point first. So I hear it all the time

I got an LLC so I don't need insurance. I just heard that this last week

Guys, the goal of an LLC is to protect you if there's a lawsuit, but what does a plaintiff attorney going to do?

They're going to try and pierce the veil of the LLC and show that you were negligent or reckless or grossly negligent

Nerve just careless or all these different

Terms and they're gonna try to pierce the veil because you didn't protect it and all you had was one sheet of paper from some

online

Incorporation sites, so they pierce the veil and that happens. You need to maintain and treat it like a regular business

Do your annual maintenance?

I got a plan for that if you need it

But the point is the LLC is more than just one sheet of paper and it can be found negligent

That you didn't carry insurance

That's right. Let me be clear about that. So you have an LLC. Oh, I don't need insurance. Well me as a plaintiff attorney

I could sue you and go. Hey, you had an LLC and it was negligent you were careless for not even having insurance

So I'm gonna pierce the veil and come after you that happens. So you have to at least have some base policy

so if you're a

Landlord and you have rental property you're going to have a landlord policy and if you're a business owner

You might have a general liability insurance policy and that works hand in glove with your LLC

because again, oh

Doesn't the other argument right the better one. Oh, I just need insurance

I don't need an LLC

Well, does your insurance company always rush to your side? Oh, let me pay that claim

No, they have exclusions - they're not gonna cover mold. They're not gonna cover asbestos

they're not gonna cover some latent method situation or you were

Negligent yourself. So we're only gonna pay so much and then we have policy limits for this and policy limits for that

no, we don't cover an act of God like an earthquake or this and you didn't have

water

Flood insurance or you didn't have right insurance?

Companies don't pay out everything every time

so if you're gonna hang your hat on an insurance policy and no LLC and your insurance

Policy doesn't pay out you want to have a fail-safe you want to be able to say no

I got my LLC, so see they work hand in glove

The LLC can protect you and then you have an insurance policy

Behind it or you have an insurance policy and the LLC behind it. So you're using them both together next myth. Oh I can

get a homeowner's policy for my rental property and I don't have to get a landlord policy because the

Homeowners policy is cheaper

well

This is a common mistake of landlords is they look for the cheapest insurance?

Possible. Now while you're probably watching this video is you need an LLC for rental code? That's where we mostly use

LLC's is for rental property

If you have an operational business

We're going to be making an S election to become an S corporation watch my other videos on that

But you're looking at an LLC probably because you have rental property

And so when you have a rental property

You're gonna think you can get a standard homeowners insurance policy which are pretty cheap for your own home

but when you have

Tenants and you have a rental property. You're right

The insurance company's going to charge more and you have to get the landlord policy

So remember you want the landlord policy and who is the additional insured?

It's the LLC

so you might get the policy in the name of the LLC because it's on title to your rental and then you that owns the

landlord policy or you get a landlord policy and name the LLC is

Additionally insured you can get the policy first in the LLC later you get the LLC first and get the policy later

But you again you want the hand and glove and make sure you get the right

insurance

versus the wrong insurance with the LLC working in concert

So it all comes together number four and finally cost benefit analysis

Believe it or not combining a good LLC with the right type of insurance can actually save you money

Some people go down the LLC route and they'll pay for an LLC in another state with exorbitant fees

be careful of the Nevada's dam and and

Who's setting it up in Wyoming or somewhere when you don't even have real estate to justify that watch some of my other videos will

Read my articles on that watch out for that sales pitch

But you overpay for more LLC than you need and then I have other people again that will go out and buy more insurance

Than they need to avoid an LLC

Hey

Here's the easy solution

Set up the LLC and the state where you have the rental property don't overdo it and then get the basic home owners

Landlord policy or business liability policy with a commercial umbrella that way you're getting the most affordable insurance

Not overdoing it with the right type of LLC and the state where you're doing business

Now when you've got two or three million dollars worth of real estate

Hey

I'm

Throwdown and we're gonna get a little more complex and have multi entity

Structuring to better protect your assets when you're a brand new investor a brand new

Business owner and only three or four rental properties don't overdo it. There's a lot of scams out there

Anyway, our law firm helps clients in all 50 states set up the right entity with all the pieces and parts

not that one sheet of paper and it can be as low as

800 bucks just to talk to a lawyer for at least an hour and get it done, right?

This is not a promo video or a sales pitch video many of you that watch my videos

I normally don't go into this phraseology

But I want to I want to protect you and I want you to get the right entity and going online and just click click

Click and setting up the wrong entity can cost you thousands if not thousands of dollars to so when you're debating

Insurance in an LLC. You can actually do it right with a good consultation to bring it together

Keep your cost down set up the right entity and the right state with the right type of insurance

Thanks so much for watching that video and I want to be your source for tax and legal strategies

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