Every business has to have insurance of some kind, but what about partnerships? If you do have some ownership in a business arrangement but not the entire organization as a whole, you should only be required to insure your share. This is what limited liability insurance for small business is for. Why should you be liable for everything? If you have a limited role in daily business practices and operations, you should only have to pay for coverage of 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 business’ daily operations and being considered personally liable for business-associated debts.
The “limited partner”, as mentioned above, doesn’t have a lot of say in the daily operations and decisions of the business. There can be more than one limited partner involved in a small business. To make up for not getting an active role in decisions, you get the benefit of not having to pay off claims or business debts with personal assets. However, the limited partner can still potentially lose his / her financial investment in the company depending on the circumstances.
What Else to Look for in Limited Liability Insurance for Small Business
Another thing to consider when looking for limited liability insurance for small business is that the tax rules different somewhat. All partners are required to report and pay taxes individually on their share of the yearly profits. You probably won’t have to pay self-employment taxes since your status in the business is not “active”, thus your share of the partnership isn’t considered “earned income”. The general partner(s), on the other hand, do control the business’ day-to-day operations and therefore liable for business debts.