Understanding the Details of Corporate Insurance
A corporation is a complex business organization with expanded liability risks. Corporations often have many employees and must abide by strict legal requirements and tax regulations. Depending upon the corporate structure, shareholders may own the company, and the board of directors may have more or less impact on the function of the corporation. But ultimately, the company is responsible for all actions and financial moves the business makes. No matter what kind of service you offer or product you sell, corporate insurance is a must.
The complexities of business insurance are best managed with the help of corporate insurance advisers. You can connect with an independent agent in the Trusted Choice® network who can help you navigate the many requirements and options. An independent agent has the ability to compare policies and quotes from several different corporate insurance companies to find the right coverage for your needs. Contact a local member agent in your area today.
How Many Corporations Exist?
Results as of March, 2013:
- Domestic profit corporations: 759,531
- Domestic nonprofit corporations: 150,957
- Foreign profit corporations: 52,174
- Foreign nonprofit corporation: 3,472
- Limited partnerships: 20,734
- Limited liability companies: 706,223
- Trademark/service mark registrations: 17,820
- General partnerships: 14,506
- Limited liability partnerships: 3,412
- Fictitious name registrations: 609,439
The Pros and Cons of Running a Corporation
The process of forming a corporation is complex. There are three types of corporations: S-Corps, C-Corps and LLCs. Each has its benefits in terms of structure and protection for the individuals involved. For example, generally, only smaller businesses can take advantage of the tax liability pass-through of an S-Corp. A legal or accounting firm specializing in corporate entities can help you choose the best model for you.
You’ll need to register your corporation within the state in which your company operates and obtain the necessary permits. Don’t forget to register with the IRS and state revenue bureaus so that you can be taxed appropriately.
This might seem like a lot of work, but running a corporation has some great perks:
- Capital: In addition to making a profit through standard business operation, a corporation can also generate a profit by selling stock. It’s easier for large businesses to make a profit selling company stock because it is more plentiful.
- Corporate tax: Owners of corporations are taxed separately than the business entity. Only your salary and bonus are taxable, and any additional profits are taxed at a lower rate than the personal income tax rate.
- Employee strength: Because of the powerful nature of a corporation, it can secure a variety of high quality benefits, which can help to attract top quality employees. Some corporations even offer partial ownership through stock.
- Limited liability: A shareholder cannot be held accountable for the company’s actions. Corporation heads also have some protection against responsibility for corporate debt and liability for corporate wrongdoing. However, note that for this protection to stand, the owners and officers must maintain separate finances and accounting from the corporate entity.
Running a corporate business entity also has its disadvantages, including:
- Paperwork: No matter the size of your business, paperwork isn’t a very fun task, but the bigger the business, the bigger the paperwork load. Corporations have a responsibility to maintain detailed records due to government regulation on all levels.
- Startup investment: Starting a corporation requires a vast amount of time and money. Most businesses operate for years before becoming profitable, and before moving to corporate status.
- Double taxation: The corporation must pay taxes on its earned profits; the shareholders then must also pay taxes when they are paid dividends from those profits.
For many businesses, the move to corporate status is a huge leap that requires a lot of effort and investment. Just like when you move to a new house or buy a new car, you need to update your policy to corporate insurance coverage when you form an S-Corp, C-Corp or LLC.
Corporate Insurance Coverage Needs
For any insurance company issuing a commercial policy, the name of the game is risk. While all businesses have an element of risk, the types of policies that you need should specifically address individual threats.
Depending upon the products and services your company provides, the size of your company, number of employees and many other factors, you will need some combination of coverage types. The specific corporate insurance in your insurance portfolio may include:
- Liability coverage, in several different forms
- Property and equipment insurance
- Commercial vehicle coverage
- Data breach insurance
- Employee fidelity insurance
- Intellectual property insurance
- Group life insurance
- Inland marine insurance
- Surety and fidelity bonds
- Business interruption insurance
- Workers compensation
A small business that has less than 500 people doesn’t face the same liability issues as a multi-national company with thousands of employees. While a solid business insurance plan is required for both large and small companies, more underwriting is required for the corporation due to its size and more complex coverage may be necessary.
For this reason, it is important to work with a knowledgeable agent who can fully assess your risks and concerns and tailor a complete insurance plan to your company.
Corporate Liability Insurance
Corporate liability insurance, in all of its forms, is arguably the most important insurance for a corporation. A corporate entity can become somewhat of a target in our litigious society, making this coverage critical to protect the financial well-being of your corporation.
Several forms of liability protection are available for corporations, including:
- General liability: Covers bodily injury and property damage your company or employees may cause.
- Professional liability: Also known as errors & omissions liability or "E & O," this covers risks pertaining to information, professional services, consulting and advice that can potentially lead to losses for clients or customers.
- Product liability: If you manufacture or sell products, this coverage protects you from potential legal claims and lawsuits consumers may file against your corporation due to illness or injury related to your products.
- Directors and officers insurance: This liability policy protects the directors and officers for risks related to the work they perform for the company, in the event that they are sued.
- Fiduciary liability insurance: This policy covers your company with regard to the legal liability of a fiduciary or trustee (e.g. benefits plan administrator) on your staff, in the event that person is responsible for an error or negligent act resulting in a loss.
- Business umbrella liability: A business umbrella policy is "excess liability" insurance that provides an extra layer of protection over the other liability policies (including general liability, professional liability and commercial auto liability) that you may have in place. Sold in increments of $1 million, this affordable coverage is excellent protection against large lawsuits due to catastrophic loss by a customer or other party.
Corporate Health Insurance
Offering health benefits to your staff has a number of benefits. For example:
- A good health benefits package can help to ensure that your employees have the coverage they need to manage their health.
- Healthy employees are less likely to have downtime from illness and lose productivity.
- Excellent health benefits can help your company to retain valuable employees.
Group health insurance can be expensive since employers foot at least half of the premium, but they are completely tax-deductible. The Affordable Care Act brings many changes to the healthcare system, including federal regulations on the minimum amount of healthcare that can be offered to employees.
If your corporation already offers health insurance, you’re exempt from this standard, but it’s a good idea to speak with your insurance agent to make sure you’re in compliance with federal law. Otherwise, you could be facing hefty fines.
Corporate Insurance Services and Risk Management Teams
In the corporate world, it often takes one or more professional teams of advisors to fully manage risk. Larger corporations often utilize a range of services to identify and mitigate the risks of the enterprise.
While there is often cross-over in the functions of the various professional services your corporation may need, sometimes all are necessary to ensure that your corporation keeps fully apprised of risks in order to manage them proactively.
For example, you may require:
- Professional risk management services to help assess your corporate risks and mitigate their likelihood or their impact on the company's financial standing.
- A team of legal advisors to advise on public liability concerns and ensure that the language of all of your corporate communications is legally sound.
- Forensic accountants to investigate potential employee fraud, for example with regard to fiduciary responsibility.
- Corporate insurance services to help manage your commercial insurance coverage, from professional liability insurance to workers compensation.
An independent agent in the Trusted Choice network who specializes in business insurance can be a valuable part of your risk mitigation plan. One of these agents can help to fully assess your risks and get the right corporate insurance in place to protect your company financially. Because they have access to numerous commercial insurance companies, these agents can manage your complete portfolio of corporate insurance, even when various policies must be assembled from multiple providers.
Finding Corporate Insurance with the Trusted Choice Network
When you work with an independent agent in the Trusted Choice network, you have a local insurance professional who will meet with you, help to fully review your corporation's risks and identify the exact coverage you will need to manage them.
Independent agents have signed a Pledge of Performance and are committed to customer service. Your agent will advocate for you and ensure that your corporate insurance needs are met. Contact a member agent today and get the protection you need.
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