Set an LLC to save on liability insurance as sole trader?
Disjoint
Posts: 181 Forumite
Hi all,
What started as a side business has now become a bit more than just a side business. I make roughly £1k of revenue every month from managing a few properties for some friends, I get the gas safety certificate and do things by the book. I recently took on a construction contract for £3k and supervise a builder that has his own liability insurance.
I trade as a sole trader, and while at first I was not too worried about something going wrong and a big lawsuit - as I grow I am starting to worry, this business will probably get to £3k a month in a year or two (solid organic growth). I briefly looked at a liability insurance quote but was quoted North of £1k.
Given the situation, would I be better off moving the business in an LLC in which case if there are any issues they would turn themselves against the LLC and take whatever assets there are in it while shielding my personal assets. Or should I cough up the £1k. I have a small LLC I created for a JV with a partner, the costs to open were ridiculously low - we haven't made money out of it so filing is dead easy. Here I would probably look at getting a cheap online accountant which would likely cost me £500 a year. I don't need the cash from this business, so would be happy to accumulate it at 20% for a few years and potentially re-invest it out of the LLC, which is another consideration.
What started as a side business has now become a bit more than just a side business. I make roughly £1k of revenue every month from managing a few properties for some friends, I get the gas safety certificate and do things by the book. I recently took on a construction contract for £3k and supervise a builder that has his own liability insurance.
I trade as a sole trader, and while at first I was not too worried about something going wrong and a big lawsuit - as I grow I am starting to worry, this business will probably get to £3k a month in a year or two (solid organic growth). I briefly looked at a liability insurance quote but was quoted North of £1k.
Given the situation, would I be better off moving the business in an LLC in which case if there are any issues they would turn themselves against the LLC and take whatever assets there are in it while shielding my personal assets. Or should I cough up the £1k. I have a small LLC I created for a JV with a partner, the costs to open were ridiculously low - we haven't made money out of it so filing is dead easy. Here I would probably look at getting a cheap online accountant which would likely cost me £500 a year. I don't need the cash from this business, so would be happy to accumulate it at 20% for a few years and potentially re-invest it out of the LLC, which is another consideration.
0
Comments
-
LLC is an American entity and 'lawsuit' something you hear on US TV. However you are talking £'s.
Wherr are you based?0 -
LLC is an American entity and 'lawsuit' something you hear on US TV. However you are talking £'s.
Wherr are you based?
I always make that mistake - mea culpa.
LTD company here in the UK (I worked for a US company here so it explains the mistake, we were also full of lawsuits!)
London based0 -
You need liability insurance, but I can't actually see what you need it for. Are you a lettings agent? A project manager? A contractor? A contract manager?
Before you get quote for LI, you need to define what you do.Eat vegetables and fear no creditors, rather than eat duck and hide.0 -
The "should I incorporate" question isn't just about risk. It's also about tax, and a bunch of other things. You'd likely benefit from meeting with an accountant or solicitor who advises start ups on this sort of thing.
On the face of it, if you're being quoted £1k for liability insurance on £12k of turnover, then I think it's possible you're doing something terrifyingly risky. It's also possible that whoever gave the quote doesn't understand your business model. Other possiblities exist!
If you're doing something terrifyingly risky, then that might outweigh all other factors and mean that of course you should incorporate. But it also might suggest you should review your business model (and maybe stop employing 17 year olds to drive £100k Ferraris around the country, or whatever it is that's pushed the premium sky high).
If whoever gave you the quote doesn't understand your business model, then finding a broker might help. I once ran a business doing something relatively specialised, was horrified at the first PI quote I got, then got a broker recommendation from a friend in the same industry. The second quote was for less than a fifth of the first (the cover was also different, but the cheaper policy covered everything I actually needed without bells and whistles I didn't need).0 -
It can an ethical decision. If someone was injured as a result of your actions, you would hope that they were provided for, but if you just closed the Ltd company, they probably would not be provided for. Apart from that you might not be very popular and find it hard to start up again in business again.0
-
Thanks guys for the answers.
Ended up getting a PI insurance for £50.... Initial quote was on crack and as somebody pointed out, they probably did not understand the business I was going to do ... At all.
This will save me the hassle of opening an Ltd until I actually want to keep cash in the company.0
This discussion has been closed.
Categories
- All Categories
- 343.1K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.2K Work, Benefits & Business
- 607.9K Mortgages, Homes & Bills
- 173K Life & Family
- 247.8K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards