Small Business Limited Liability Insurance Information: A Brief Overview of LLP Insurance

Every business should have some form of insurance, but what about partnerships? 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 portion. 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 operations and practices, you only need to pay for coverage on 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 the debts associated with the business.

The “limited partner”, as mentioned above, does not have much of a 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 having 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 their financial investment in the business depending on the circumstances.

What else to look for in small business limited liability insurance

Another thing to keep in mind when shopping for small business limited liability insurance is that the tax rules differ a bit. All partners are required to file and pay taxes individually on their share of the annual profits. You probably won’t have to pay self-employment taxes since your status in the business is not “active,” so your share of the partnership isn’t considered “earned income.” General partners, on the other hand, control the day-to-day operations of the company and are therefore liable for business debts.

There is another type of company called a “limited liability company” or LLP, in which all the owners have limited personal liabilities. In these types of situations, LLPs tend to be professionals such as 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 appropriate 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, check out Hiscox Business Insurance and the benefits this company offers. There are a variety of customized small business insurance plans to fit your needs.

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