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Do you need insurance if you own a single member LLC? - YouTube
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- Do you need insurance
if you have an LLC?
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- Yes, oh my god yes.
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I don't understand these people
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that give this terrible advice.
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- Whoa Shreya, tease
the video a little bit.
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(laughs)
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People are already gonna have tuned out.
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- Are they though?
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Or will they be brought in
by my passionate response?
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- You gave 'em the answer though.
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(laughs)
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They're done.
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- That's okay.
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- Oh I don't have my smart glasses.
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Anyway, that was a question
Shreya Ley here received today
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while talking to a business owner.
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- Yeah.
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- Tell the story about this,
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you know, anonymize it and stuff.
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- A business owner called me.
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They have been in business for a while.
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They started out as a,
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oh my gosh you're so much smarter already.
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- Keep going.
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(laughs)
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- They started out as a sole proprietor
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and then they switched to an LLC.
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Thus is the progression
of a lot of businesses
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and when they did that,
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they have a business
mentor or maybe mentors,
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somebody gave them advice,
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somebody they trust gave them advice
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that they could just
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drop their business insurance,
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now that they had an LLC.
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Because LLCs will protect
you, no matter what
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and you don't need insurance anymore.
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And I panicked a little bit inside
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and tried to stop myself
from forcefully saying like
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"No, that's all false, this is all wrong".
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And instead I told a story
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to help them see the error of their ways.
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- Yeah I mean, lets throw
it down a little bit.
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- Sure.
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- Why would you not want to do that?
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And don't wanna put you on the spot,
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I know the answers if
you want me to tell 'em.
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- Oh yeah, why don't
you weigh in, Colin Ley?
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- Well first of all, insurance
for protecting any asset,
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your business, your
personal assets, whatever,
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insurance should be your first stop
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because it's typically
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the cheapest form of protecting yourself
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and one of the greatest
benefits of having insurance
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is having the insurance
attorney team on your side,
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so if this sole proprietor
turned LLC owner
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gets in some sort of legal
trouble, hopefully it's a claim
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that's covered under
the policy and their--
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- And then their attorneys will help
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to defend the business owner.
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- They'll roll in their and be like
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"No, you guys are wrong!"
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- So that the business owner
doesn't have to shell out
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a 30,000 dollar retainer to a
litigator, litigator whatever.
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I was saying litigation--
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- Alligator?
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- and then litigator, I don't know.
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(laughs)
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- $30,000, that's cheap.
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The average lawsuit I think
is somewhere between like
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50 and 100 thousand dollars.
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- Yeah.
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- So you don't want that
covered under your insurance?
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- Well and didn't we
speak, well I was reading,
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never mind about speaking to someone.
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I was reading "Bad Blood" and
they were talking about how
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this lawsuit cost the defendants
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like 2 million dollars
to defend themselves.
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That's ridiculous.
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- Yeah, very expensive.
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The other thing is,
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so I imagine what this advisor
was thinking of was is that
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"Oh the LLC gets sued"
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and then it just gets kinda
stuck there inside the LLC
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and nobody
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(coughs)
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Excuse me.
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And nobody then has to pay
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the judgment or the
liability that comes up.
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But if that were the sake--
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- Who pays the attorneys?
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(laughs)
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- Conspiracy theory?
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- No!
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(laughs)
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They still have to hire an attorney
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to defend yourself from the lawsuit--
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- Yeah yeah, that's step one.
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But then, so if there's
a judgment against you
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and you had no insurance,
they're gonna come to the LLC
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and look to take the assets of the LLC
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to cover the judgment
since there's no insurance.
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But say there aren't sufficient assets
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in the business, in the LLC,
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then that creditor is just gonna
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(popping sound)
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pop right through that LLC
and come after you personally.
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And then they're coming to take your home,
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they're taking your money,
they're taking your car.
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You're gonna be driving around
a $3,000 dollar Honda Civic.
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Or maybe a 1992 Ford--
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- Ford Escort!
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- Ford Escort, which is
nothing to be ashamed of
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(laughs)
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33 miles per gallon, classic.
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- Yeah.
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(laughter)
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Sure.
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But you know, I think the--
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- So is that worth the risk?
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I mean it's tempting to
get a 1992 Ford Escort
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but it's probably a
lot easier to just have
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your business liability insurance.
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- When Colin, as an aside, suggested
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that I buy myself a 1992 Ford
Escort not that long ago,
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I turned to him and I said
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"Why don't you drive that car?"
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- Yeah, and this is a correction
it's actually 1990 Escort,
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that's the one you want.
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'92, it gets all weird.
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'90 is nice and boxy.
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Beautiful colors, wonderful interior.
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- Sure, sure.
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- So, anyway, what were we talking about?
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- Oh, you still need insurance.
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- Don't ditch your liability insurance
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when you go from being a sole
proprietor to an LLC owner.
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- Yeah.
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- It's a poor decision I think.
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- Yeah, I would say that it's
an ill informed decision.
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Then, once you're ready
to level up even further
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and you got those personal assets
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that you wanna protect from your business,
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asset protection bro.
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- That gonna be our catchphrase?
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Asset protection bro.
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(laughs)
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Anyway, if you found this helpful,
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maybe you know a sole
proprietor who turned LLC owner.
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If so, maybe share this video.
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Give it a like.
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Comment below.
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Do one of those things and we
would really appreciate it.
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Thank you.
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- Thank you.
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