Every company should have some form of insurance, but what about associations? 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 part. That’s what small business limited liability insurance is for. Why should you be responsible for everything? If you have a limited role in daily business practices and operations, you should only have 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 typically 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 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 make up for not having an active role in decisions, you get the benefit of not having to pay claims or business debts with personal property. However, the limited partner can still potentially lose their financial investment in the company depending on the circumstances.
What else to look for in small business limited liability insurance?
Another thing to consider when looking for small business limited liability insurance is that the tax rules are somewhat different. All partners must individually report and pay taxes on their share of the annual profits. You probably won’t have to pay self-employment tax 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 responsible for business debts.
There is another type of partnership called a “limited liability company” or LLP, in which all owners receive limited personal liabilities. In this type of situation, 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 for your state, pay the appropriate filing fee, and create the partnership agreement.
This is just a brief description of small business limited liability insurance. To learn more about your options, see Hiscox Business Insurance and the benefits this company offers. There are a variety of personalized small business insurance plans tailored to your needs.
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