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

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 it's hard enough to live the American dream without being out on the web on Google trying to find answers to complex questions and just clicking a mouse hoping you got it right my team and I want to be a huge resource treat the law firm accounting firm by Education resources on my site. Please continue to follow these strategies I know the safety thousands now click here if you want to be a part of my newsletter It's awesome weekly updates and deadlines and strategies and tips also subscribe to my youtube channel You'll love it and make sure to click the bell icon So you get a little ping whenever there's a new video and finally check out my site Marjory Kohler comm with all sorts of videos Probably 70 plus videos 30 plus hours of content that has saved you thousands

Channel: Mark J Kohler

Views: 24,376

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, KKOS, Mark, Kohler, Mark Kohler, LLC, Insurance, Corporate veil, Taxes, Keep your money, Insurance vs LLC, company maintenance, Savings, kkos lawyers, Author, Small business, Rentals, Homeowners insurance, landlord insurance, general liability insurance, limited liability company, rental property, umbrella insurance, umbrella, Tax tip, Tax advice, Legal tip, Legal Advice, protection, policy

Id: rSNAAPpAL0Q

Length: 8min 18sec (498 seconds)

Published: Tue Aug 21 2018