Insurance for the Shop
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  1. #1
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    Default Insurance for the Shop

    Hello everyone, long time lurking and reading everyone topics here.
    I wanted to reach out and talk about operating a shop on your personal property.
    What is everyone else doing?

    I have plenty of land and a building to operate out of but it is all still considered personal property.
    How does your insurance work?
    Should i Lease the building to the business?
    Who does everyone else use for insurance.

    My options are to run out of my current buildings until the business can buy or build another commercial property or building.

    Or just keep saving and start right out of another commercial space first.

    Just looking for what others have done to date and the best way to go forward.

    Thank you

  2. #2
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    I sent you a pm check your box

  3. #3
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    Find an old farm where there's plenty of electric service on the poles out by the road. In addition to your (low key) shop, plant a couple acres (just over the minimum at least) of soy or corn to get the ag exemption on property taxes. Buy 10 horses (10 is the minimum I think) and each year sell them back and forth between you and a family member, get a tax exemption. I know of someone doing this with his ex wife. They own 2 small farmettes across the road from each other, and they get some sort of nice tax break doing it.

    Anyway, that's my DMF_TomB impression for today......

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  5. #4
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    Quote Originally Posted by dkmc View Post
    Find an old farm where there's plenty of electric service on the poles out by the road. In addition to your (low key) shop, plant a couple acres (just over the minimum at least) of soy or corn to get the ag exemption on property taxes. Buy 10 horses (10 is the minimum I think) and each year sell them back and forth between you and a family member, get a tax exemption. I know of someone doing this with his ex wife. They own 2 small farmettes across the road from each other, and they get some sort of nice tax break doing it.

    Anyway, that's my DMF_TomB impression for today......
    Uh...where's the spreadsheet?

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  7. #5
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    Way too much punctuation and capital letters.

  8. #6
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    I have a similar situation- a farm where I live, and do business. I have a business insurance policy that covers fire and theft for my business buildings, including all my equipment, office computers, materials, and finished goods. and it includes general liability and work in progress insurance as well. Mine is with Liberty. Its not cheap, but its pretty comprehensive- I do a fair amount of government jobs, and the government agencies will accept my Liberty policy as proof of liability insurance, which is usually a pretty high hurdle.

    I also have a separate homeowners policy for my house.

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  10. #7
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    Thank you for the info Ries, i will have to give liberty a call and see what they come up with.

  11. #8
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    Try Sentry Insurance also.

  12. #9
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    1. Leasing to the business makes sense.

    2. Try to keep the business under the radar for as long as possible by using PO boxes for billing and official purposes. Don't put signs on the property advertising a business, that is just asking for unwanted attention.

    3. Is your land zoned commercial? If not, #2 above will only work if the business is really small.

    4. You do not need personal insurance for the business. Landlords are generally only liable for "foreseable" accidents in access areas in which they did not exercise "reasonable care", like someone slipping on an unplowed sidewalk. Only the business would require general liability insurance.

    5. I would recommend against liability insurance, especially for a small company. In the million to one chance you get sued, just liquidate the business. In that case your maximum liability is what is called the "disbursement". In other words, if there is an accident and you liquidate the business and sell its assets for $50,000, then the most a plaintiff can recover is the disbursement, the $50,000. If you get a $1,000,000 insurance policy, then the most they can recover is $1,000,000. Guess which situation makes you more likely to get sued? Lawyers only sue businesses that have insurance (or significant assets), so getting insurance is counterproductive because you are just enlarging your target profile. Once again we are talking about a million to one chance here.

    6. I would recommend against landlord liability insurance as well for the same reasons as #5 and because it is a total ripoff. Also, if you create ANY target, it can make all your holdings a target. For example, if you have two entities and only one entity has insurance, a lawyer will sue both because it does not cost them anything to add names to a lawsuit. Lawyers frequently add random, indigent people to lawsuits even though they know they can't pay, because once they file it is "free" to add names. So your best approach is not to have any insurance.

    7. Yet another reason not to get insurance is that it does not really protect you, and in fact just INCREASES your risk. The reason for this is that in the rare instance of an accident, you are just as likely to get sued for an amount under your insurance as over it. For example, let's say there is a fatal accident. Do you think the lawyer will limit himself to to the $2 million maximum of your insurance policy? Of course, not he will sue for $5 million or the most he thinks the jury will award. So, the way he calculates it: I will get at least the $2 million in insurance and another $3 million "extra" that is low chance of recovery but why not? So, you will end up declaring bankruptcy anyway, even though you had insurance. The insurance actually increases your chance of going into bankruptcy, because if you did not have insurance you would have had a much better chance of not getting sued in the first place.

    8. It is a good idea to put the property into an LLC and then have the LLC borrow money against the property and give it to you personally. That way the LLC will have very little in the way of assets. Try to keep the LLC's equity under $100,000. That pretty much makes you lawsuit proof. There is no lawyer on the planet who will waste his time suing an LLC with less than $100,000 in assets and no insurance.

  13. #10
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    obviously, everybody's situation is different- but I havent had a single job in probably 20 years where they didnt want a formal proof of 1 million dollars in liability insurance, sent by my insurance company, before a contract is signed. I work a lot with government agencies, but also a lot with private companies, and, in my market segment, liability insurance is required to get any work at all.
    And I found that the best price and coverage was from a comprehensive business policy, as opposed to several policies covering different aspects of my business. I have a half dozen buildings I use on my farm for business- and not having them insured is simply not feasible- I couldnt work, and I couldnt afford to rebuild em out of pocket. And homeowners insurance does NOT cover a machine filled shop with 400 amps of 3 phase...

    Also, in many states, an LLC is really false security- it costs very little more, and gives you much more protection, lower taxes, and flexibility, to become an actual corporation. Costs maybe a grand or two a year, all up, in fees, accounting, and tax prep, but saves much more in the long run.
    At least, in my state, its a no-brainer.

    Again, depends on how much of a business you really are. If I was making 30 grand a year fixing my neighbors broken stuff, and low bidding on low margin stuff, insurance would probably be a luxury I cant afford- but my business absolutely requires it, and its a necessary prerequisite to making any money at all.


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