Insurance Blues! Disability And Workers Com Insurance Need?

Business By KuyaRomeo Updated 11 Sep 2011 , 5:53pm by KuyaRomeo

KuyaRomeo Posted 8 Sep 2011 , 8:55pm
post #1 of 10

Very excited, as we found a rentable commercial kitchen that fits our needs. Been trying to get everything together . . cross our t's and dot our i's.

Just got off the phone with our Insurance Broker . . .

We thought we would only need liability (which will be less than $500 year), and that is fine.

But she was explaining to me that NY may also require me to have Workers Comp and Disability Insurance . .. which is expected to drive the price up to around $1,700 per year (total for all 3). . . BIG difference. Just another Bill, I had not really expected, as nothing is ever black and white.

Anyone using a shared kitchen in NY have any experience with this?

I am one person (sole prop), however I have a few family members who will be helping out from time to time (non paid). Am I really forced to have these additional insurances?

I read on the NYS website that if you have NO employees you can file for an exemption. How can a business run with at least one employee/owner?

Looking for others to share some knowledge?

9 replies
jason_kraft Posted 8 Sep 2011 , 9:23pm
post #2 of 10

In CA (and probably NY too) you are required by law to carry worker's comp insurance if you have anyone other than the owners of the company working for the business, even if they are not paid. For the first couple years my wife and I ran the business ourselves (we are both co-owners of the LLC that owns the business so worker's comp was not required). We eventually hired an unpaid intern, and worker's comp coverage for her is about $600/year here. Not sure about disability.

You may be able to get around this by forming a multi-member LLC with all family members who will be helping listed as officers...you'll have to pay the NY LLC tax of $500/year but at least you will get something for it (additional protection from liability). I don't know if this will work in NY so you may want to consult a lawyer specializing in this field.

MimiFix Posted 9 Sep 2011 , 11:26pm
post #3 of 10

For the size of your start-up, you do not need to hire an employee. (Family members who occasionally help out are not considered employees.) As a sole proprietor you will be able to do most of the work yourself the first year or two. IMO you needn't worry about worker's comp and disability insurance when you begin. There are enough other issues to worry about...

And of course your insurance broker is suggesting you may need worker's comp and disability insurance. She just happens to have a policy sitting on her desk. ("When you're a hammer, everything looks like a nail.")

jewelsq Posted 10 Sep 2011 , 1:06pm
post #4 of 10

In NJ, as an LLC, I am automatically required to have Worker's compensation insurance. I do not have to cover myself (which would double the bill). If I'm not mistaken, disability is taken out of paycheck wages. I'd check on that and I'd also get several quotes. I don't know about your area, but in mine there are many insurer choices.

jason_kraft Posted 10 Sep 2011 , 2:50pm
post #5 of 10
Quote:
Originally Posted by jewelsq

In NJ, as an LLC, I am automatically required to have Worker's compensation insurance. I do not have to cover myself (which would double the bill).



As an LLC in NJ you are only required to carry WC if anyone other than the LLC members works for the company.

http://lwd.dol.state.nj.us/labor/wc/employer/require/insure_index.html

LindaF144a Posted 11 Sep 2011 , 12:35am
post #6 of 10

My business is in NY state. If you are the owners of the company and the only ones working you can waive the workmen's comp and disability. And your insurance company should know this because it was our insurance company that told us this.

Unless it is a requirement for the place where you are renting the kitchen, then your insurance company is trying to sell you something you do not need. This means you should find another insurance company.

As owners of our company, and having it as an S corp through NY state, we are allowed to waive the need for workmen's company and disability for ourselves, which we do. It cost enough to run a business in this fricking state. Every little bit helps.

scp1127 Posted 11 Sep 2011 , 6:54am
post #7 of 10

I think owners can waive disability in every state. They don't care if you hurt yourself. But I remember with my construction company, they did offer me WC for a discount after I bought it for employees. If you don't have health insurance, a deeply discounted policy for yourself may be something to look into. But I had 21 employees. You may not get much of a discount if you only have one employee. It is worth asking.

And for those who are not required to provide WC, please be aware that you and all of your assets will be held responsible for an accident. This is not a savings because employees do get hurt. One emergency room visit for a burn will probably be more than the yearly policy. And for larger claims, WC easily pierces any corporate structure and LLC.

KuyaRomeo Posted 11 Sep 2011 , 2:44pm
post #8 of 10
Quote:
Originally Posted by LindaF144a

My business is in NY state. If you are the owners of the company and the only ones working you can waive the workmen's comp and disability. And your insurance company should know this because it was our insurance company that told us this.

Unless it is a requirement for the place where you are renting the kitchen, then your insurance company is trying to sell you something you do not need. This means you should find another insurance company.

As owners of our company, and having it as an S corp through NY state, we are allowed to waive the need for workmen's company and disability for ourselves, which we do. It cost enough to run a business in this fricking state. Every little bit helps.




Thanks LindaF144a.

Right now, I am a sole proprietorship with a DBA. I don't know much about incorporating . . . so after reading your post, I did a bit of research online.

I see that if I form an S corp, I can avoid being double taxed / self employment tax. And If I incorporate and make my two "volunteers" into "officers" and we have no employees, perhaps I can avoid the workers comp and disability insurance, as well.

Can you give me a little information?

I found that I can file a certificate of incorporation for $135. That seems pretty cut and dry.

But I am confused, do I need an EIN?
Federal TAX ID? (previously DBA uses SSN)
And I get lost because it says that I need to file something with the Federal Tax to "select S-Corp" as my filing, but this can only be done certain times of the year? Do you know what this is? and what I need to do?

Certainly, I can pay a few hundred dollars and have someone file it all for me, but we are really sinking every penny we have into opening up our bakery, and each bit counts, so I would rather do it all myself if it's not too complicated.

Thanks!!

LindaF144a Posted 11 Sep 2011 , 4:48pm
post #9 of 10
Quote:
Originally Posted by KuyaRomeo

Quote:
Originally Posted by LindaF144a

My business is in NY state. If you are the owners of the company and the only ones working you can waive the workmen's comp and disability. And your insurance company should know this because it was our insurance company that told us this.

Unless it is a requirement for the place where you are renting the kitchen, then your insurance company is trying to sell you something you do not need. This means you should find another insurance company.

As owners of our company, and having it as an S corp through NY state, we are allowed to waive the need for workmen's company and disability for ourselves, which we do. It cost enough to run a business in this fricking state. Every little bit helps.



Thanks LindaF144a.

Right now, I am a sole proprietorship with a DBA. I don't know much about incorporating . . . so after reading your post, I did a bit of research online.

I see that if I form an S corp, I can avoid being double taxed / self employment tax. And If I incorporate and make my two "volunteers" into "officers" and we have no employees, perhaps I can avoid the workers comp and disability insurance, as well.

Can you give me a little information?

I found that I can file a certificate of incorporation for $135. That seems pretty cut and dry.

But I am confused, do I need an EIN?
Federal TAX ID? (previously DBA uses SSN)
And I get lost because it says that I need to file something with the Federal Tax to "select S-Corp" as my filing, but this can only be done certain times of the year? Do you know what this is? and what I need to do?

Certainly, I can pay a few hundred dollars and have someone file it all for me, but we are really sinking every penny we have into opening up our bakery, and each bit counts, so I would rather do it all myself if it's not too complicated.

Thanks!!




The best information I can give you is this - GET AN ATTORNEY.

It is complicated and this should be a viable expense in your business plan. If you have not accommodated for this, it will bite you in the long run. In fact it already has. Because an attorney would have been able to tell you that your insurance guy is full of BS and you need find another. They are paid to protect you, not scam you.

Seriously, let them and their extensive knowledge do all this for you, so that you can concentrate on what you do best - baking. The $400 or so it will cost for them to do it for you is absolutely, without a doubt, priceless.

Do NOT let anyone else come on here and give you the "shortcut" way to do it. You are only as good as the team around you, no person is an island.

I have a lawyer, accountant, social network director, website person, graphics/sign person, radio salesman and several food ingredient connections, along with a fantastic day-to-day staff. If I did not have these people that I could contact for their services I would go insane in an instant trying to juggle all that and work on building a business at the same time. It is far easier to call them and let them take care of it professionally than for me to try to do it all and save a few dollars. Because in the end, the money saved will not help you when you let something fall through the cracks and lose customers. And you do NOT want to lose customers. Lost customers = lost revenue = you losing all that "every penny we have" sinking into a business.

Sinking every penny you have does not mean buying equipment, it also means buying services of other professionals to help you too. I cannot emphasize this enough.

This is also how a local economy grows. It is businesses helping other small businesses. One of the main things I emphasize in my business is how I also support other local businesses around me in my expenses for the store. I cannot tell you how many times a day someone tells me how important is for them to know that this is important to me and that I do this.

Rethink where you are putting that money. The peace of mind I have right now in how my company is structured is priceless. I am not publicly going to give details, but I know for a fact that this is not always how business is done in my area and it will come back to bite them eventually. Do not underestimate the importance of doing things legally and correctly. Contact an attorney and pay for the legal advice. Let them tell you the advantages and disadvantages. You will be better off for it.

Sorry, off my soapbox now.

KuyaRomeo Posted 11 Sep 2011 , 5:53pm
post #10 of 10

Linda,

Thank you once again for your insight. I believe that you rare 100% correct in what you have stated, in all aspects.

I do want to make a few clarifications, not that it matters in the end lol . . just to give a more honest perspective:

I don't believe my Insurance agent was trying to scam me. I was putting a 30 minute conversation with her, into one sentence. She did a detailed job of explaining to me that I may not need this, however it was their past experience that a Health Permit would not be issued until we had all 3 (liability, WC, and Dis). But again, she recommend that I call my contact in the Health Department for a final answer. My agent was going to get me a liability quote and hold off on the others, until we had a final answer from the Health Department. She did give me some ball park figures, if indeed, I would need this. To her best knowledge, she thought the HD was going to require me to have this, but urged me to find out through them. I honestly did not feel she was pushing me into getting the other insurance. . .

I thank you for providing as much detail as you have. I know that certain areas are personal to each of our 'business' and there are certain areas I need to explore on my own . but thank you for sharing as much as you could.

In a nutshell:

For a year or so I made cakes and desserts for friends and family . . because I worked for a bakery decorating cakes, during college. It was a passion of mine, even though it was not my career choice.

As more and more requests come in, I realize that I can not bake cakes for free anymore . . . and a "Thank you bottle of wine" does not help pay my expenses, although it is appreciated.

I exhausted my research in looking into a "home food processor exemption" but this has too much red tape, and I would be violating every aspect. My cakes are special order, birthdays, events, etc. I can't do that from a home kitchen.

Unfortunately, I only do about 12 cakes per month, as it stands. I don't make enough profit to really afford a retail establishment . .yet. But I believe, I have the passion, and commitment, and sacrifice . . . as well as an outstanding product . . to make this work.

I found a shared kitchen that will also allow me to put my product on their retail store front for a small commission. I think this is a great opportunity for me to keep my costs/rent down ($500 month) and give me the chance to put my products on the shelves of an established retail outlet.

But with the $500/month rent, comes cost of ingredients, equipment, boxes, stickers (holy guacamole lol . . . logo stickers are gonna run me about $1,000/month to have our name on our boxes) . . . insurance . . .and it goes up and up and up.

All I really wanted to do was sell a few cakes and do what I love . . and I am forced to get into a commercial kitchen to do that . . so be it.

It is an adventure I am ready for . . . but still trying my best to get to the bottom of how to make this happen.

I don't want to rush it, but at the same time . . I really need to get my product on those shelves by late October . . . the holiday Season could certainly help keep me afloat.

After reading all of your information . . .I honestly feel the best thing for me is to remain a Sole Proprietorship, for a few more months - and see how things go profit wise. See if I am event able to keep my head above water. Hopefully, I will learn that as a Sole Prop . . I may not need WC and Dis insurance . . and for a few months I can test the waters.

Then, as things improve . . . I can take on an attorney and accountant to incorporate in the best way possible. Or, if things don't improve, I can cut my loss and close my doors . . .

Thank you again . . for your insight and experience.



Quote:
Originally Posted by LindaF144a

Quote:
Originally Posted by KuyaRomeo

Quote:
Originally Posted by LindaF144a

My business is in NY state. If you are the owners of the company and the only ones working you can waive the workmen's comp and disability. And your insurance company should know this because it was our insurance company that told us this.

Unless it is a requirement for the place where you are renting the kitchen, then your insurance company is trying to sell you something you do not need. This means you should find another insurance company.

As owners of our company, and having it as an S corp through NY state, we are allowed to waive the need for workmen's company and disability for ourselves, which we do. It cost enough to run a business in this fricking state. Every little bit helps.



Thanks LindaF144a.

Right now, I am a sole proprietorship with a DBA. I don't know much about incorporating . . . so after reading your post, I did a bit of research online.

I see that if I form an S corp, I can avoid being double taxed / self employment tax. And If I incorporate and make my two "volunteers" into "officers" and we have no employees, perhaps I can avoid the workers comp and disability insurance, as well.

Can you give me a little information?

I found that I can file a certificate of incorporation for $135. That seems pretty cut and dry.

But I am confused, do I need an EIN?
Federal TAX ID? (previously DBA uses SSN)
And I get lost because it says that I need to file something with the Federal Tax to "select S-Corp" as my filing, but this can only be done certain times of the year? Do you know what this is? and what I need to do?

Certainly, I can pay a few hundred dollars and have someone file it all for me, but we are really sinking every penny we have into opening up our bakery, and each bit counts, so I would rather do it all myself if it's not too complicated.

Thanks!!



The best information I can give you is this - GET AN ATTORNEY.

It is complicated and this should be a viable expense in your business plan. If you have not accommodated for this, it will bite you in the long run. In fact it already has. Because an attorney would have been able to tell you that your insurance guy is full of BS and you need find another. They are paid to protect you, not scam you.

Seriously, let them and their extensive knowledge do all this for you, so that you can concentrate on what you do best - baking. The $400 or so it will cost for them to do it for you is absolutely, without a doubt, priceless.

Do NOT let anyone else come on here and give you the "shortcut" way to do it. You are only as good as the team around you, no person is an island.

I have a lawyer, accountant, social network director, website person, graphics/sign person, radio salesman and several food ingredient connections, along with a fantastic day-to-day staff. If I did not have these people that I could contact for their services I would go insane in an instant trying to juggle all that and work on building a business at the same time. It is far easier to call them and let them take care of it professionally than for me to try to do it all and save a few dollars. Because in the end, the money saved will not help you when you let something fall through the cracks and lose customers. And you do NOT want to lose customers. Lost customers = lost revenue = you losing all that "every penny we have" sinking into a business.

Sinking every penny you have does not mean buying equipment, it also means buying services of other professionals to help you too. I cannot emphasize this enough.

This is also how a local economy grows. It is businesses helping other small businesses. One of the main things I emphasize in my business is how I also support other local businesses around me in my expenses for the store. I cannot tell you how many times a day someone tells me how important is for them to know that this is important to me and that I do this.

Rethink where you are putting that money. The peace of mind I have right now in how my company is structured is priceless. I am not publicly going to give details, but I know for a fact that this is not always how business is done in my area and it will come back to bite them eventually. Do not underestimate the importance of doing things legally and correctly. Contact an attorney and pay for the legal advice. Let them tell you the advantages and disadvantages. You will be better off for it.

Sorry, off my soapbox now.


Quote by @%username% on %date%

%body%