Resedential Home License In Mass & Protection

Business By countrygirll Updated 27 Feb 2011 , 12:23am by countrygirll

countrygirll Posted 25 Feb 2011 , 7:40pm
post #1 of 9

I have been working on having my kitchen licensed in MA for months as well as protecting my personal property. My question is, what do other members do to protect themselves? I have looked into an LLC however, after sitting with my tax lady last evening, I am looking at dishing out quite a bit of money every year for an LLC in MA--boy are we high!!!! I am starting out and hold a full time job, so I'm not sure that spending the money for an LLC is where I need to be right now; HOWEVER, protecting my home is very important. My tax lady suggested a sole propietor or maybe discussing with my insurance agency about an umbrella policy? Or even being insured as a hobby baker? I have never heard of that before. I did contact my insurance and they will cover me for $500/year with an LLC.
Any thoughts or suggestions are greatly appreciated!

8 replies
cupcakemkr Posted 25 Feb 2011 , 7:57pm
post #2 of 9

I decided to wait on the LLC, I did the SP route. I have additional insurance policy for my business that covers me up to $2m - costs me ~$400 per year. We use Vermont Mutual via Commerce Ins.

jason_kraft Posted 25 Feb 2011 , 9:50pm
post #3 of 9

Our business is relatively high-risk so we have both business liability insurance (~$500/year) and an LLC ($800/year in CA), but if your risk is lower you could probably get by for a while with only business liability insurance until your sales volume increases.

Any personal umbrella policy will probably specifically exclude business activities, you need business liability coverage. State Farm and The Hartford should sell relevant policies.

If you are only a hobby baker and do not accept any form of compensation for your cakes you shouldn't need separate business liability coverage, since in that case the personal umbrella coverage should be sufficient. If you don't already have personal umbrella coverage you should get it anyway, it's dirt cheap for the coverage you get against personal liability.

countrygirll Posted 26 Feb 2011 , 6:10pm
post #4 of 9

Cupcakemkr--The thing that scares me about SP is what I have been told -- my business and personal assets are at risk. Again, I will have to go and talk with the insurance again, but I cannot take the chance to go with an insurance that does not protect my personally property. I work with food now, and I'm the lucky one who gets to see the emails that come in concerning how someone got sick off of this or that--and they want compensation. Of course I'm dealing with major companies here, and people feel that they can "more" out of them because they are bigger.

It's really sad that they don't have something out there that can help new businesses getting started without putting them in a financial crisis from the go. How do people start??? Do most take the risk of risking their personal property in order to get started??? My Dad was self employed for most of his life and I remember him getting sued when it wasn't even his fault--and the judge sided with the guilty party!

My tax lady told me " there are so many gifted and talented people out there that could make life so much more interesting by opening their own business but because of the world we live in today, they can't afford to protect themselves!" so very sad.

thank you for taking the time to answer my question...

countrygirll Posted 26 Feb 2011 , 6:17pm
post #5 of 9

jason-kraft,
thank you for taking the time as well to answer my question. I need to go back to the drawing board and see if there is any sort of insurance I can purchase that will protect me personally. As I mentioned above, I have a home, and to me, that is not low risk. I want to do cakes/cupcakes on the side to supliment my income, but not to take the chance of loosing my home.

Can you imagine having to take out extra insurance to be a hobby baker and bake for people for free! I want to go back to the old days......

Lots of luck jason-kraft with your business--I hope you are doing ok in this economy....

jason_kraft Posted 26 Feb 2011 , 6:20pm
post #6 of 9
Quote:
Originally Posted by countrygirll

It's really sad that they don't have something out there that can help new businesses getting started without putting them in a financial crisis from the go.



The LLC form of business was specifically created to make it easier to for small businesses to get started. If paying for an LLC and liability insurance (typically in the $600-1200 range annually depending on the state) entails a financial crisis you might want to hold off starting a new business until you have more capital to invest.

countrygirll Posted 26 Feb 2011 , 7:18pm
post #7 of 9

I wouldn't have a problem paying that annually--if that was it. My tax lady explained the taxes I would be paying, as well as paying into social security--which I am already currentlly doing with my job. I'm not much of a gambler to begin with, and in this economy where job losses are almost daily, I'm just not sure it is a wise decision to gamble with an LLC, insurance, state fees and taxes that will cost me well over $1400 without knowing if my business will even take off in this economy.

again, thank you for your help...I do appreciate it.

jason_kraft Posted 26 Feb 2011 , 8:22pm
post #8 of 9
Quote:
Originally Posted by countrygirll

I wouldn't have a problem paying that annually--if that was it. My tax lady explained the taxes I would be paying, as well as paying into social security--which I am already currentlly doing with my job.



You would only need to pay taxes and SS based on distributions from the LLC to yourself, which is dependent on your profit. There are many deductions you can take that can reduce your taxable income significantly. If your business runs a net loss on paper you would not only not have to pay income taxes (or SS), but you can usually deduct that loss against your other non-business income and get money back from the IRS.

From the IRS's perspective, if you create an LLC and do not elect to be taxed as an S-corp or C-corp, there is no difference between your LLC and a sole prop.

Quote:
Quote:

I'm not much of a gambler to begin with, and in this economy where job losses are almost daily, I'm just not sure it is a wise decision to gamble with an LLC, insurance, state fees and taxes that will cost me well over $1400 without knowing if my business will even take off in this economy.



Definitely a smart move, make sure your business plan is in order before you start investing in the business.

countrygirll Posted 27 Feb 2011 , 12:23am
post #9 of 9

I didn't know that about the LLC, and after reading this, I'm not sure the tax lady knows either. I'm going to have to some more research on this..... thank you again so much!

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