If my Business is Incorporated do I Still Need Business Liability Insurance?

Many people who venture into business ownership opt for incorporating themselves. Whether the company is an outfit of fifty people or five, incorporation is a relatively easy process to complete. Although it involves a degree of money to file all the correct documents and paperwork to legally become incorporated, the cost is not exactly out of reach.

Like conducting employee interviews, the decision to become an incorporated entity is actually a very personal one when it comes to a small business owner. Even a very small business can incorporate itself. A business does not have to have hundreds of employees or potential stock holders to have the legal status that goes with being a corporation.

Yet, when a new or small business wants to investigate if this is the route for them to take it is usually because there is a common assumption involved. That assumption is that if they do incorporate they are protecting themselves as individuals from lawsuits. In other words, the company can take the brunt of any legal action from a case of negligence to libel or slander claims.

The company will always need to be involved legally in any action it may face. However, what the owner's or potential owner's of that company might think is that they are personally protected from any judgments, and so on. There is a separation, legally, between the individuals in the company and the company itself. This is why many people opt for becoming incorporated. They assume they will be protected against being held liable in any legal claim.

Personally speaking, their assets will be protected in a lawsuit involving the corporation. However, the assumption that the incorporated status itself protects everyone against liability is incorrect. Furthermore, the belief that because of this a corporation does not need business liability insurance is also incorrect.

What Liability Insurance Does my Incorporated Business Need?

A corporation will want incorporated business liability insurance or commercial liability insurance coverage. This general form of protection helps protect it financially in the event of lawsuits, claims of negligence, product defects, and injuries to customers or employees on the job and more. It works the same for a corporation, no matter the size, as it does for sole proprietors.

The incorporation itself basically creates a dividing line between the corporate entity and the people behind that entity. You would not want your automobile dealership to face a lawsuit and, in the event of a judgment, face having your own car be taken to satisfy that judgment. When you own a company, this is exactly what incorporation helps you to never have to face. The corporation itself would be sued and have to satisfy the judgment as the stand-alone legal entity it is.

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