Corporation VS: Insurance Umbrella Policy - Posted by Nick

Posted by David Alexander on July 26, 2001 at 23:51:45:

Trusts, Corps, LP’s/LLC’s and an Insurance Umbrella Policy all used in conjunction to protect you.

My thoughts anyways.

David Alexander

Corporation VS: Insurance Umbrella Policy - Posted by Nick

Posted by Nick on July 26, 2001 at 23:45:25:

I am considering starting up a corp. But my buddy said Why dont you just get a big umbrella policy from State Farm, it would be a lot easyer. I got to thinking and from the protection side of this real estate business it sounds like it could protect me just as good as a corp. would. I do not know the first thing about Corp.s or how to operate them correctly. I do know that for about 250 bucks a year I can get a 2 million dollar umbrella policy and if I ever get sued I would have State Farm attorneys fighting for my case. I talked to the insurance agent and he said that the umbrella would cover my liability up to the amount of the policy in the event I am sued. I figure that with a good set of attorneys on my side the chances of a judgement exceeding that are slim. Provided that I conduct business in a fair and responsible manner of course. Am I missing something here?? I am just a small time invester with a rental or two that flips a house or two a year. Thanks

Taxes - Posted by Earnest

Posted by Earnest on July 28, 2001 at 08:41:59:

If you don’t have any sort of corporate structure, you have to file your taxes as a Sole Proprieter. This subjects you to increased scrutiny by the IRS. Big Brother’s current policy looks much more carefuly at Sole Proprietorship than to small corporations. You’ll find other tax benefits to corporate filing, too.

Corporation VS: Insurance Umbrella Policy - Posted by Rob FL

Posted by Rob FL on July 27, 2001 at 01:13:56:

What happens if you get sued for something that isn’t covered by the insurance policy? Like discrimination, sexual harassment, breach of contract, etc.

After working 10 years for an insurance company, I know for a fact that the first thing an insurance company does when a claim gets filed is to look and see if there is any way to deny the claim.

Just some thoughts.

Re: Corporation VS: Insurance Umbrella - Posted by Mike Schmidt (IL)

Posted by Mike Schmidt (IL) on July 27, 2001 at 24:07:03:

If you are using a personal umbrella policy, ALL your personal assets are a open risk, including the home you live in. What if you have a 2 million dollar umbrella and 5 homes on the books plus savings and your own personal home, all in your name. Whats to stop someone from suing you for $3 million? ALL your assets are there for the taking.

This is why its suggested here to place each home in its own LLC/Corp etc. If a tenant gets hurt in house #1 and house #1 is owned by the Nick LLC and thats all it ownes, you stand a much better chance of only being liable for the value of Nick LLC. Thats why its called a Limited Liability Company.